The group said weekly house reservations have fallen 12.4 per cent year on year to 191 in the nine weeks since August 1. It told investors: “While Bellway entered the year with a strong forward order book, given the backdrop of rising interest rates and wider economic uncertainty, the board currently expects to deliver volume at a similar level to the prior year.” It is also expecting a fall in average selling prices to around £300,000 from £314,399 in 2021-22, but said this largely reflects a higher proportion of social housing sales.
There have been gathering signs of a housing market correction as soaring mortgage rates and worries over the wider economy are set to push down on prices. Halifax said earlier this month that average UK house prices fell by 0.1 per cent in September, while the Royal Institution of Chartered Surveyors (Rics) warned last week that the market has lost momentum, with new buyer inquiries falling for the fifth month in a row. Housebuilding giant Barratt Developments recently said its outlook for the year was “less certain” amid rising interest rates and market uncertainty though home completions are likely to be broadly in line with the previous year.
Bellway said its full-year out-turn will depend on the key autumn and spring selling seasons. But it added: “While the sector faces a number of near-term headwinds, including rising interest rates and the expiry of Help to Buy, unemployment levels remain low and the recent positive changes to stamp duty thresholds offer additional support for housing demand.”
The comments came as the group posted a 36.5 per cent fall in pre-tax profits to £304.2 million for the year to July 31 after taking a £346.2m hit on fire safety provisions in the wake of the Grenfell Tower tragedy. With this stripped out, underlying pre-tax profits rose 22.5 per cent to £650.4m.
Richard Hunter, head of markets at investment platform Interactive Investor, said: “Bellway is putting the building blocks in place to leave it flexible and well prepared for what is likely to be a demanding environment in the shorter term. Its focus on longer term planning should enable it to withstand a tougher housing market. For example, the group has increased its land bank over the period.”
Mark Crouch, an analyst at social investing network eToro, noted: “Bellway has posted a reasonably encouraging set of numbers if you’re looking backwards. In terms of what the company is doing to get through the now obvious crisis, it says it has expanded its land banking. If the Truss administration does manage to unlock the housing development Rubik’s cube and kickstart growth through a major housebuilding programme, then Bellway will be the first to benefit. But for now it looks like the firm is more keen on battening down the hatches than preparing for good times.”