Bellway warns of growing divide as Scottish sales remain weak

Published on Friday 5 June 2009 20:47

HOUSE sales in Scotland are set to remain weak well into next year as rising unemployment puts a damper on the market, Britain's third-biggest builder has warned.

Bellway finance director Alistair Leitch made the prediction as the housebuilder revealed it has found evidence of a growing north-south divide in the homes industry.

Bellway signalled that, while sales across the UK remained well below early-2008 levels, there were growing signs of two separate markets in Britain.

Its divisions in the south of England were showing signs of a pick-up in sales and stronger house prices. The north, the north-west, and the Midlands of England as well as Yorkshire, were all weak.

"Whilst conditions vary from region to region, the southern-based divisions have experienced a marginally stronger market and it is envisaged that turnover in these divisions will be much higher by the year end than the northern-based divisions whose markets still remain fragile," Bellway said in a trading statement.

Leitch said yesterday that Scotland had taken longer to enter the slowdown than the northern half of England last year, but now has "more of a northern feel about it". He maintained that "stabilisation has entered the market" but warned that the impact of continuing job losses meant that the timing of any recovery was uncertain.

He said: "The concern I have, particularly for the Scottish market, is unemployment. I don't think the full impact of unemployment – particularly unemployment from the financial services sector – has fully affected Scotland yet and, for the whole country, I don't think we've got unemployment out of the way."

Some economists are forecasting unemployment in Britain could peak at three million, and in Scotland many of the job losses relate to financial services, where salaries tend to be higher than in other sectors.

Leitch said it was also possible that an unfolding political crisis could put the housing market back into limbo, with buyers put off from entering the market simply because of uncertainty.

Bellway split Scotland into two divisions in 2005, adding a Livingston office to its existing office in Hamilton.

It closed the Livingston office last August as part of a cost- cutting programme, although it has retained the building and plans to reopen it when the economy recovers.

In its statement, Bellway said that first-time buyers were still struggling to raise deposits, and that this was preventing a recovery in demand.

After cutting its cost base, the company was "happy with where we are this year" for the period to 31 July, which is expected to see house sales around 30 per cent below where they were a year ago.

Bellway is not forecasting a quick recovery, with its financial year to 31 July, 2010 expected to see a similar rate of sales as this year.

Despite the gloom, Leitch said that around half of its sales were at prices at or above Bellway's internal targets, compared with around a quarter at the end of 2008.