2024 to See a ‘Material’ Drop in Output According to Bellway

After Bellway announced forward sales are down 44% and market has weakened further in last two months, what does the outlook for 2024 hold?

Housebuilder Bellway, featured on the list, has joined the ranks of construction companies projecting a substantial decline in production. The company anticipates a notable reduction in property completions in the upcoming year due to the housing market’s diminishing strength. 

In its year-end trading update, Bellway, which recently unveiled a major restructuring initiative resulting in the closure of two divisions, pointed out that the recent elevation in mortgage interest rates during June and July has led to a less favorable trading landscape. Consequently, the company now foresees a significant drop in the number of property completions for the next fiscal year.

Housing revenue dipped 4% up to July 31

The company’s forecast coincided with its report of housing revenue amounting to £3.4 billion for the period ending on July 31, a decrease of 4%. This decline was attributed to the sale of 10,945 homes, marking a 2.3% reduction.

Interestingly, despite Bellway witnessing a steep 35.9% decrease in reservation rates for private sales throughout the year, the overall reservation rate only fell by 28.4%. This discrepancy can be attributed to Bellway’s shift in focus towards selling properties to housing associations and other bulk purchasers.

Waning demand and robust completions part of the problem

Bellway’s trading update emphasised that a combination of waning demand and the relatively robust number of completions by the company led to a substantial decrease in its forward order book. The value of Bellway’s forward orders plummeted by 44%, plummeting from over £2 billion to a mere £1.19 billion.

The company acknowledged that it had demonstrated a “resilient” performance during the 2023 financial year, but the recent surge in mortgage rates during June and July 2023 had undoubtedly contributed to a less favorable trading environment.