Demand for Bellway's new homes has fallen sharply as would-be buyers were deterred by economic uncertainty, higher mortgage rates and an end to the Help to Buy scheme.
The developer issued a half-year trading update to investors in which it said a shortage of affordably priced, higher loan-to-value mortgages had impacted its reservations, which fell 31.7% to 138 per week. Amid the downbeat market report, the North East-based housebuilder said its reservation rate had improved week-on-week from its weakest point in the final part of 2022 - where rates were down 60% - reflecting what it said was a seasonal pick-up and some easing of affordability pressures.
Ahead of the key spring selling season, investors were told the firm was encouraged by visitor numbers at its sites and its website traffic throughout January. This came as the average selling price of a Bellway home rose by 1.6% to £316,900, though the developer said it had used targeted incentives to secure reservations in some instances.
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Weaker private reservations were said to be partially offset by Bellway's social house building activities as housing revenue was expected to increased from £1.7bn to £1.8bn for the six months to the end of January. Meanwhile land buying activity was markedly lower - owing to what Bellway said was an "uncertain economic back drop".
The firm contracted to buy 2,428 plots for £197.3m, down from 8,660 plots at a cost of £567.8m in the prior half year period. Bellway said it was being increasingly selective of new sites and had even decided to abandon the purchase of 418 plots across three previously approved sites.
In response to market uncertainty, Bellway said it had taken measures to bolster its balance sheet, including a freeze on new recruitment, limiting land approvals and alignment of investment with sales demand.
The firm's chief executive Jason Honeyman said: "Bellway has delivered another strong performance, with our teams and supply chain partners demonstrating their ongoing commitment to provide high quality homes and service for our customers. Following our preliminary results in October 2022, we experienced a period of weaker trading through to the end of December, with affordability constrained by higher mortgage rates and economic uncertainty affecting consumer confidence.
"Since the start of the new calendar year, mortgage rates have fallen from their recent peak, and we have been encouraged by a seasonal increase in visitor levels and an improvement in reservations. Looking ahead, Bellway's experienced team and operational strength will enable us to navigate through changing market conditions. The group has a robust balance sheet, with substantial cash resources and it is well-placed to invest, when compelling market opportunities arise, to continue to deliver returns for shareholders in the future."
Bellway's results mirror those of Newcastle-founded Barratt, which yesterday said it had seen a “modest uplift” in reservations this month, though its weekly net reservation rate remains 46% lower year-on-year since the start of January.
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