Britain’s Bellway said on Wednesday it would build fewer homes this year and warned that it expects sales completions to drop “materially” amid a sharp housing sector slowdown triggered by higher mortgage rates.
Interest rate rises which have driven up home loan payments and increased affordability concerns have hit Britain’s housing market, putting off prospective buyers, while a decline in house prices has hurt margins for housebuilders.
Bellway said it built 10,945 homes in the fiscal year ended July 31, slightly down from the guidance of 11,000 units.
The FTSE 250 company, which is based in the city of Newcastle in the north-east of England, said it would update its forecast on volumes in its full-year results in October.
“In the current financial year, given the level of the order book and prevailing low reservation rates, legal completions are expected to decrease materially,” it said in a statement.
Bellway said it expected cost pressures to moderate in the months ahead, but inflation would continue to exert further downward pressure on profit margins in the current year.
It said it expected its underlying operating margin for its last financial year to be around 16%, down from 18.5%, due to high building costs and the overall impact of inflation.
Bellway, whose builds range from one-bedroom apartments to six-bedroom family homes, said its full-year overall reservation rate fell 28.4% to 156 per week, and it also saw a steep fall from 190 units during the Feb. 1-June 4 period.
Its housing revenue slid 3.4% to 3.4 billion pounds ($4.34 billion) for the fiscal year 2023, while its average selling price fell to 310,000 pounds from 314,399 pounds a year earlier.
Bellway’s mid-cap competitors Crest Nicholson and Vistry have said high mortgage rates were hampering demand from first-time buyers.
Its larger rival Barratt Developments forecast it would build around 20% fewer homes in 2024, while high-end builder Berkeley expects the same drop in home sales. Reuters
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