Housebuilder Bellway flags signs of recovery after plunging demand

Housebuilder Bellway has said homebuyer demand has started to improve after seeing reservations plunge by nearly 50% due to soaring mortgage rates.

The group, whose headquarters are in Newcastle, reported underlying pre-tax profits falling 4.6% to £312.1 million for the six months to January 31.

It delivered record revenues, up 1.6% at £1.8 billion, but saw its private homes reservations rate tumble by 43.8% to 91 a week over the first half in the aftermath of last autumn’s mini-budget market turmoil, as well as the end of the Help to Buy scheme.

Bellway said it was seeing signs of a recovery in demand, helped by a seasonal spring uplift in the property market and as mortgage rates have eased off from the highs seen after last September’s mini-budget chaos.

The group said its private reservation rate lifted to 135 a week – an improvement on the levels seen at the end of last year, but still far below a year earlier, when it stood at 239 a week.

But its order book remains lower, at 5,842 homes valued at £1.6 billion against £2.2 billion a year ago, and the group confirmed it expects property prices to fall to around £300,000 on average over the full year, down from £314,399 last July.

Despite the half-year trading pressures, Bellway cheered investors with news of a £100 million share buyback.

It added that if recent improved reservation rates continue throughout the spring selling season, it is on track to deliver around 11,000 homes, down only slightly on the 11,198 seen the previous year.

Jason Honeyman, group chief executive of Bellway, said: “We have been encouraged by the moderate, yet sustained improvement in reservations since the start of January 2023, and the group remains on track to deliver volume output of around 11,000 homes in the full financial year.”

Bellway said it saw a 10% jump in build costs, driven largely by energy prices.

It said lower demand for construction materials is helping ease pressures on availability, which had been leading to some delays on developments.

It added: “Elevated levels of construction activity also contributed to the upward pressure on costs, given the very strong demand for new homes in the two years up to the summer of 2022.

“Following the recent slowdown in reservation rates across the wider sector, we anticipate overall supply chain pressures to ease in the year ahead.”