Bellway warns over house price falls and 31% drop in new builds

Housebuilder Bellway has warned it will build nearly a third fewer homes over the year ahead amid slumping demand and falling house prices.

The Newcastle-based builder said average weekly reservations per site fell 27% year on year to 99 in the nine weeks since its August 1 year-end as home-buyers are increasingly hit by surges in mortgage costs due to rapid interest rate rises.

It is now forecasting a “material reduction” in completions, predicting it will deliver around 7,500 new builds in 2023-24, down 31% from 10,945 the previous year.

Bellway also warned it is expecting house prices to drop by 5% to around £295,000 from £310,306 in 2022-23 as it ramps up incentives to try to boost buyer demand.

It comes after full-year figures showed underlying pre-tax profits fell 18.1% to £532.6 million for the year to July 31.

Housing completions edged 2.3% lower, while revenues dropped 3.7% to £3.4 billion.

Bellway said it was a “resilient” performance, but added it is a “changing market”.

Group chief executive Jason Honeyman said: “The stubborn inflationary environment and resulting increase in mortgage interest rates over the last year continues to impact affordability and customer demand.

“While current trading is challenging, we have been encouraged by the more recent fall in UK Consumer Price Inflation.

“If this trend continues, there are grounds for cautious optimism that this could lead to a moderation in mortgage interest rates and an improvement in customer demand.”

Housebuilders have seen a worsening of market conditions as surging mortgage rates have knocked buyer confidence and spending power.

Recent figures from lending giant Halifax showed house prices fell by 0.4% to £278,601 in September and were 4.7% lower year on year.

The Bank of England has increased raised rates to 5.25%, although it suspended its torrent of increases in September as the pace of UK inflation finally eases.