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Sales of new homes in the UK are picking up as mortgage rates stabilise and the housing market shows early signs of recovery, according to FTSE 250 developer Bellway.
The housebuilder said its rate of sales to private buyers was 21 per cent higher in the six weeks since the start of February than in the same period last year, rising to 0.67 homes reserved per site each week — a key metric for housebuilders.
The update follows a brutal period for housebuilders, as high mortgage rates and the cost of living stretched buyers’ budgets. Bellway’s profit before tax fell 62 per cent to £117mn in the six months to the end of January owing to lower sales, tighter margins and higher building safety expenses.
The company expects to build 7,500 homes in the 12 months to July, down from almost 11,000 in the same period a year ago. Shares were broadly flat in morning trading on Tuesday.
Chief executive Jason Honeyman said the market was beginning to turn around thanks to rising wages, falling inflation and more competitive mortgage rates.
“The housing market seems a lot brighter. It is on the road to recovery,” he said. “It is happening a little quicker than we thought.”
Bellway’s private reservation rate stood at 0.43 per site per week on average in the six months to the end of January, but picked up to 0.59 in January and 0.67 since February 1.
The wider housing market has also shown signs of improvement, with the number of homes on the market up 20 per cent year on year in February and the number of sales agreed up 15 per cent, according to Zoopla.
The improvement has come despite setbacks for developers in the planning system. “From my perspective, it is as bad as it has ever been,” said Honeyman, who cited last year’s changes to national planning policy — which softened local housing targets.
“Each local authority or council has got the option of whether they want new homes or not,” he said. “I don’t see any improvement until there is a change of government . . . We factor that into how we manage the business.”
The update comes after the UK competition regulator last month found that the UK’s “complex and unpredictable planning system” was contributing to a shortage of new homes, at the end of a year-long study into the issue.
The Competition and Markets Authority has also launched an investigation into eight housebuilders over whether they shared commercially sensitive information, including Bellway. Bellway said on Tuesday that it would “continue to engage positively and co-operate fully” with the probe.
Like other developers, Bellway has increased the use of incentives to support sales. Housebuilders across the industry are generally reluctant to cut headline prices, but they will give buyers perks such as free fixtures or paying their stamp duty. Honeyman said the level of incentives was now “steady” at 4-5 per cent of purchase prices.
Recently, several developers including Bellway have started to offer a scheme where the builder pays 3-5 per cent of the purchase price to the mortgage lender to subsidise a much lower interest rate for the buyer for 2-5 years.
Keith Adey, Bellway’s chief finance director, said there has been positive early interest from clients in the scheme, which in effect allows buyers to “borrow at the interest rates of a few years ago”.
