Housebuilding construction with scaffolding
Housebuilding operations/Adobe
 
  • Reservations fall 25% year on year in five months to 4 June
  • Interest rate uncertainty and cost of living crisis impacting demand
  • Lower forward order book and 2024 financial year housing output

UK housebuilder Bellway (BWY) said reservations for the four months to 4 June fell 24.9% year on year and flagged cost of living pressures and the ‘uncertain path’ of interest rates continuing to impact housing demand.

The company said that while headline pricing has remained ‘robust’ across its regions it has resorted to ‘targeted’ incentives in some instances to secure reservations.

With UK wage figures surprising to the upside today it suggests inflation is stickier than thought which puts pressure on the Bank of England to continue with rate hikes next week.

This will likely exacerbate shrinking mortgage availability with many lenders repricing or removing products in response to higher interest rates. Last week credit rating agency Moody’s warned UK house prices could fall by a further 10% over the next two years.

Shares in Bellway dropped 4% to £21.57 leaving them marginally up on the year but below the £25 level reached in May as investors responded positively to early signs of a housing market recovery which now seems like a distant memory.

WHAT DID THE COMPANY SAY?

CEO Jason Honeyman commented: ‘Bellway has delivered an encouraging trading performance, buoyed by a seasonal uplift through the spring, and the Group is on track to deliver full year volume output of around 11,000 homes. 

‘Bellway's experienced teams, strong balance sheet and high- quality land bank, position the Group well to successfully navigate changing market conditions and continue to play an important role in increasing housing supply in the years ahead.’

The lower reservation rate has reduced the value of Bellway’s forward order book by 29% to £1.7 billion comprising 6,172 homes compared with 8,152 in the same period of 2022.

The company reiterated guidance for an average selling price in the year to 31 July of £300,000 down around 4.5% from 2022. Given a smaller forward order book and uncertain rate environment the firm is guiding for lower volume output in the 2024 financial year.

COST INFLATION EASING

The company said build cost inflation for materials and labour has persisted across the industry but since January 2023 lower demand for construction materials has resulted in increased product availability.

Management said it expects overall cost inflation to dissipate through the remainder of the calendar year.

LEARN MORE ABOUT BELLWAY

 

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Issue Date: 13 Jun 2023