Housebuilder chief executive says firm ‘mindful’ over the current path of interest rates
Bellway said it is “encouraged” by customer demand despite reporting today that private home reservations were down by nearly 30% year-on-year over the spring selling season.
The £3.5bn turnover housebuilder said the demand, which while down sharply from the same time last year, represented a bounce back from the lows experienced in the wake of last autumn’s mini budget, and left the firm on track to build around 11,000 homes in the current financial year to July 31.
Bellway said its private reservation rate in the period from February 1 to June 4 dropped to 139 homes per week, a fall of 29.8% from the 198 seen in 2022, with overall reservations dropping less, by 24.9% to 190 per week, as the builder ramped up sales to housing associations.
The firm’s chief executive, Jason Honeyman, said Bellway had delivered an “encouraging trading performance”, which was buoyed by a seasonal uplift through the spring, and which left the group on track to deliver full year volume output of around 11,000 homes, down from 11,198 last year.
However, alluding to a return of mortgage market turmoil in recent weeks, which has seen lenders pull products in the wake of fears of higher Bank of England interest rates, Honeyman added: “While customer interest is currently healthy, the Board remains mindful that cost of living pressures and the uncertain path of future interest rates could impact housing demand.
“Notwithstanding this, Bellway’s experienced teams, strong balance sheet and high quality land bank, position the Group well to successfully navigate changing market conditions”.
Shares in the builder fell more than 2% in response to the market update, despite it confirming volume expectations for the year. The firm said its order book was down 29% by value year-on-year to £1.71bn, and 25% by the number of homes reserved. The housebuilder has only bought 4,342 land plots in the financial year so far, less than a third of the 13,496 acquired by this point in the year in 2022.
Bellway said it expected to reduce completion volumes still further from 11,000 in the 2024 financial year, “given our reduced order book, lower prevailing reservation rates and the uncertain interest rate environment, we continue to expect a lower year-on-year volume output.”
Bellway’s trading update comes after rival Crest Nicholson last week reported a near halving in interim pre-tax profit on falling sales. The latest figures from purchasing managers also show that housing construction activity has been falling for six consecutive months now, with the rate of the decline now the steepest since the pandemic.