Bellway predicts ‘material’ drop in output in the year ahead

Bellway has become the latest housebuilder to forecast a significant drop in output, saying it expects completions in the year ahead to “decrease materially” in the light of the weakening housing market.

In an end of year trading update today, Bellway, which yesterday admitted it had launched a major restructuring programme which will see the closure of two divisions, said the recent mortgage interest rate rises in June and July had “resulted in a weaker trading environment”, and it now expected a material reduction in completions for the coming financial year.

The prediction came as the firm reported housing revenue in line with expectations of £3.4bn for the year to 31 July, down 4%, on the back of the completed sale of 10,945 homes, a fall of 2.3%.

These sales came despite the firm’s reservation rate for private sales collapsing in the year by 35.9%, with the overall reservation rate falling by a much less steep 28.4%, as Bellway switched its focus to selling homes to housing associations and other bulk buyers.

Bellway said the combination of weakening demand and relatively strong completions by Bellway meant the firm saw its forward order book fall very sharply, with the value of Bellway’s forward orders dropping by 44% from over £2bn to just £1.19bn.

>> Read more: Housebuilders’ share prices drop as interest rates hit 5.25% 
>> Read more: Losses at TopHat’s factory business widen to over £20m

It said in the trading update that Bellway had delivered a “robust” performance in the 2023 financial year, but that “the recent increase in mortgage rates through June and July has resulted in a weaker trading environment”.

It added: “In the current financial year, given the level of the order book and prevailing low reservation rates, legal completions are expected to decrease materially.”

The housebuilder did not put a figure on how far completions will fall but said it would give a “further update” on the market outlook at the time of reporting its results in October.

Bellway’s update comes after Barratt, which has a June year-end, last month said it expected completions to drop by anything up to 23% in the year ahead.

The Construction Products Association has predicted that housing output will reduce by 20% this year, while the founder of housebuilder Weston Homes last month predicted that industry output will slump by around 40% in the year ahead, so bad was the current situation with both the market and planning.

Bellway also confirmed yesterday’s news that it had started a business restructure, stating that it was “taking steps to reduce headcount across the Group” following a review of overheads. However, it did not say how many staff were expected to lose their jobs or how much it expected to achieve in ongoing savings from the move. Yesterday, Bellway confirmed it was shutting its South Midlands and London Partnerships divisions and scaling back its Durham business in response to the weaking market.

Bellway’s move follows Redrow’s admission that it was shutting two divisions last month.