UK housebuilder Bellway reports a fall in demand for homes on the back of rising mortgage rates.
In its latest trading update for the period between February and June, Bellway reveals that reservations averaged 190 per week, compared with 253 in the same period of 2022. And the cancellation rate increased to 15% from 12%.
The housebuilder has a significantly smaller order book of £1.7bn, down from £2.4bn – and further reductions are deemed likely through 2023.
Bellway insists that while mortgage availability has improved in recent months, fluctuations to prices provoked by rising interest rates was affecting shorter-term availability.
The company also stresses that the end of the Help to Buy scheme has resulted in a lower year-on-year demand for first time buyers.
In the update Bellway confirms it has markedly reduced its land buying with the purchase of just 4,342 plots in the period, compared with 13,496 last year, representing a total contract value of £362m against £926m.
Quilter Cheviot equity analyst Ollie Creasey analyst at Quilter Cheviot says not much has changed for Bellway since it reported its half year results, and management have reiterated core guidance for the full year: 11,000 completions, slightly down on 2022, and an average sale price of £300k.
“That sale price is down 5% compared to the average for 2022, and the average in the first half of the year, but this fall in sale price is largely driven by a change in house types being sold (ie: more social houses) rather than a significant fall in house prices overall”.
However, he points out that despite trading holding up fairly well, like the rest of the housebuilding industry Bellway has suffered at the hands of the current economic picture.
“Management have reported a private sale rate of approximately 0.6x per week – lower than the long-term average (which is around 0.85x) but in-line with recent results from peers. With mortgage rates once again ticking up it remains an uncertain period, but demand for new homes still remains as present as ever”.
