Signs of recovery – but North builder Bellway still wary

Feb 6 2010 by Karen Dent, The Journal

SALES and orders are up at Bellway but the housebuilder says it remains cautious about the strength of the housing market’s recovery.

The Newcastle firm sold 2,247 homes in the six months to the end of January, a rise of 10% – more than 200 homes – on last year, at an average price of £156,000.

And its order book, currently standing at £390m, is now worth almost £1m more than last year. It has 2,506 homes on order, more than 300 up on the same period in 2009.

Bellway issued the figures in a trading update ahead of the publication of its interim results on March 24. But financial director Alistair Leitch said it was difficult to make solid predictions for the future.

“We’ve come in with a 10% increase in volumes for the first half which is unusual. It’s a little bit early in the traditional homebuying spring selling season to say whether that will continue,” he said.

“The snowy weather meant we lost a couple of selling weeks at the beginning of January.

“Bellway are traditionally very cautious – it’s scattered showers as opposed to sunny intervals. We want to see how the market’s going to go.”

The company, which has made a “significant” reduction in its stock of unsold homes, is starting to pump money back into building projects.

It has spend £76m on land – mainly in the South – since the start of the financial year and has agreed terms on land worth £123m. It expects to have 190 sites selling homes by the end of the year compared to 175 during the first six months.

Despite the positive figures, Mr Leitch said problems for first-time buyers seeking mortgages were still holding the market back.

“Figures from the Nationwide and the Halifax suggest that house prices are rising,” he said.

“But the volume of first-time buyers is not going through and they generally buy at the lower end, so you are getting mis-numbers in the same way that a glut of first-time buyers would suppress the average prices.”

Around 10% of Bellway’s customers are now first-time buyers, down from a high of 25% in 2005-6.

The company has already secured more than 90% of its order book for the year and Mr Leitch is confident of exceeding those targets.

He said: “We have 300 to 350 sales to go. I would expect in March that we are going to exceed our target.”

Bellway slid into the red for the first time in its history last year when it revealed an annual pre-tax loss of £36.6m after being forced to write off land valued at £66.3m.

Without that write-off, it would have made a £29.8m profit for the year. The group, which axed around half of its 2,400 staff at the height of the credit crunch, put itself on a sound footing by raising £43.7m from shareholders.