Housebuilders are “in the eye of a political storm,” according to the head of one of the UK’s top developers, who warned that property sales were slowing as a result of economic turmoil and rising borrowing costs.
“Last year was a very strong year for us . . . Financial year 2023 feels very different,” said Jason Honeyman, chief executive of Bellway.
“Private sales have reduced by a third since the start of our new financial year. That’s a concern for us. We feel like we’re in the eye of a political storm.”
Bellway said buyers had reserved an average of 191 properties a week since the start of August, compared with 218 a week in the same period a year before.
The country’s largest developer, Barratt Developments, also warned last week that sales were slowing as a result of the steep increase in mortgage rates in recent months, and particularly in the wake of the former chancellor Kwasi Kwarteng’s “mini” Budget last month.
The unfunded tax cuts in that Budget — now largely scrapped — pushed mortgage rates above 6 per cent and are set to add thousands of pounds to annual borrowing costs.
Honeyman cautioned that even with the government reversing course under new chancellor Jeremy Hunt, “the reality is that mortgage rates are not going to get back to where they were.”
The slowing sales market is likely to have a knock-on effect on new development.
Bellway said it would “take a more cautious approach” to investing in new land until the economy was more stable.
Prime minister Liz Truss and Simon Clarke, the new housing secretary, have hinted at a “pro-growth” programme of planning reform that would involve loosening some of the requirements placed on developers.
But Honeyman rejected the idea that such proposals would boost building in the short-term.
“We’ve been talking about planning reform since I left school. I wouldn’t spend too much time on that . . . the government has a lot of other things in its in-tray,” he said.
The FTSE 250 group posted revenues for the year to the end of July of £3.54bn, up 13 per cent on the previous year.
But pre-tax profits were down 36.5 per cent to £304mn after Bellway set aside £346mn to pay for repair work on buildings caught up in a fire-safety scandal.
Shares in Bellway dipped by 2 per cent on Tuesday to £17.95. The company has lost close to 50 per cent of its market value over the year to date.
Aynsley Lammin, an analyst at Investec, said the results showed “the market has clearly deteriorated markedly since the summer with the autumn selling season starting very badly.” Bellway’s results this year would be subject to “a high level of macro risk,” he added.