In its trading update for the year ending 31 July, the group said customer demand had been affected by the “volatility in mortgage interest rates”.
Bellway said sales were impacted by rising rates at the end of 2022, but this had improved by spring 2023 when mortgage pricing began to moderate.
“More recently, however, reservations in June and July 2023 were impacted by borrowing costs which rose to levels similar to those last autumn,” the firm said.
Reservation rates were down by 28.4 per cent year-on-year overall, at an average of 156 per week compared to 218 per week last year.
Help to Buy expiry hits hard
Bellway said it accelerated the delivery of social homes to offset the weaker demand for private homes, which saw a steeper 35.9 per cent reduction in the weekly reservation rate to 109.
The firm added: “The impact of rising interest rates has been particularly acute for customers requiring a higher loan to value mortgage and exacerbated by the expiry of Help to Buy in England in March 2023.”
It said the cancellation rate had also risen to 18 per cent due to softer private demand. This was compared to a rate of 13 per cent in 2022.
The group contracted to purchase 4,715 plots this year, down from 19,089 last year, with a contract value of £378.2m compared to £1.3bn in 2022. This was to span across 35 sites, compared to 107 last year.
Bellway said it continued to review previously contracted land and would not go ahead with the purchase of 886 plots across four sites as originally planned.
The group said although it would be reducing its headcount and private home building to “protect the long-term health of the business”, the changes were not expected to “compromise the group’s ability to return to growth when trading conditions improve”.
Financial performance
During the year, Bellway reported a housing revenue of £3.4bn, a three per cent reduction on the previous year’s £3.5bn. Completions fell by 2.3 per cent to 10,945 and there was a one per cent drop in the overall average selling price to £310,000.
It attributed this fall to the lower proportion of private completions, which fell from 82 per cent to 75 per cent of its total completions.
Bellway said for the year ahead, the share of social completions would remain higher and it expected a “further moderation in the average selling price”.
Jason Honeyman, group chief executive at Bellway, said: “Bellway has delivered a resilient performance, with volume output and housing revenue in line with expectations and supported by the strength of our order book at the start of the 2023 financial year. In a challenging operating environment, the result has also been achieved through the dedication of our colleagues, sub-contractors, advisors, and supply chain partners.
“The backdrop of macroeconomic uncertainty and cost of living pressures affected consumer demand during the year and, given affordability remains constrained by higher mortgage interest rates, underlying trading conditions are likely to remain challenging in the near term.”
He added: “To help mitigate this, and notwithstanding ongoing delays in the planning system, the depth of our land bank provides scope to deliver outlet growth in the current financial year and beyond.
“Bellway’s operational strength and experienced teams will enable the group to successfully navigate changing market conditions and, supported by a strong balance sheet, it is well-placed to continue to deliver high quality homes to our customers and returns for shareholders.”
