Newcastle-based house building giant Bellway said in a trading update its overall reservation rate fell 28.4% to 156 per week and its private reservation rate decreased by 35.9% to 109 per week in the year to July 31, 2023, amid “volatility in mortgage interest rates.”
Bellway said: “… the group has continued with its programme of accelerating the construction of social homes to help mitigate weaker private demand …
“The overall cancellation rate for the full year has trended upwards and averaged 18% (2022 – 13%), with the increase largely driven by softer private customer demand.”
In its outlook, the Newcastle company said: “Bellway has delivered a robust performance in financial year 2023, however, the recent increase in mortgage rates through June and July 2023 has resulted in a weaker trading environment.
“In the current financial year, given the level of the order book and prevailing low reservation rates, legal completions are expected to decrease materially …”
Bellway said that following a review of overheads, it is also taking steps to reduce headcount across the group.
In the year to July 31, Bellway said it delivered housing revenue of around £3.4 billion, a 3% reduction on the prior year and in line with previous guidance. Completions fell 2.3% to 10,945.
The overall average selling price fell by over 1% to £310,000 “primarily driven by a lower proportion of private completions, which reduced to 75% of the total (2022 – 82%).”
“In the year ending 31 July 2024, the proportion of social completions will remain elevated and together with the ongoing disciplined use of incentives, we expect a further moderation in the average selling price,” said Bellway.
“The underlying operating margin for the 2023 financial year is expected to be around 16%3 (2022 – 18.5%), and the reduction reflects the effect of build cost and overhead inflation, together with extended site durations and the increased use of sales incentives during a more challenging trading period.”