Housebuilder uses “resilient” market to halve sales via expensive incentive
Housebuilder Bellway has halved the number of sales made with private equity in the last four months compared with the same period last year as the volume of reservations increased 14%.
In an interim management statement to the City, Bellway said visitor levels and reservations had been “remarkably resilient” despite ongoing concerns about the impact of the financial market travails on the UK economy.
It said the average selling price of homes in the period from 1 August to 30 November increased 7% as well, albeit compared with an unusually weak autumn selling season in 2010.
Bellway said it is still using incentives to secure sales, but that “encouragingly, the use of shared equity as an incentive has reduced to less than 5% of reservations in the period compared with 10% last year.”
Bellway is among many housebuilders in allowing some customers to buy a smaller share of a house, with the housebuilder retaining the balance. However, the incentives are expensive and unpopular with housebuilders because they tie up capital.
However it added that the part exchange of customers’ existing homes has been used in an increasing number of transactions.
In total, reservations over the period are up 4% on the position at the same time last year, to £458m. Bellway added that it has renewed a £150m banking facility with Lloyds Bank with similar covenants.