Bleak outlook for new builds after report of 40 per cent sales slump

Alarm bells are ringing in the new build sales sector after figures have been released by a major house builder.

Bellway says that in the financial year just completed at the end of July completions and company revenue dipped only slightly - two and four per cent respectively.

But the sales for that financial year were mostly agreed before mortgage rates rose sharply, and figures going forward are far less encouraging.

An analysis of the figures by the consultancy Quilter shows that Bellway’s private reservation rate has fallen by 36 per cent during the year, with management warning that with mortgage rates in June and July 2023 returning to the levels reached during the Liz Truss government, there’s been a significant impact on the volume of sales. 

Quilter’s analyst Oli Creasey says: “We note that the order book (sales agreed but likely to complete in FY 23/24) has fallen around 40 per cent year-on-year, suggesting volumes next year will be significantly lower. Bellway’s outlook statement acknowledges this, with completions expected to decrease materially.”

Mortgage industry figures and housing market commentators say the Bellway figures, on top of the end of Help To Buy, have badly damaged new build sales.

Simon Jones, chief of investing comparison platform Investing Reviews, says: “Private reservation rates being down so sharply says all you need to know about the state of demand for property right now: it's on its knees. The end of Help to Buy has been a hammer blow.”

Graham Cox of the Self Employed Mortgage Hub adds: “Rising build costs and the increased use of buyer incentives have reduced Bellway's margins, adding to their woes. The problem is, for many first-time buyers, new builds are completely unaffordable, and the gravy train for house builders has now come to a shuddering halt."

And Joe Garner, managing director of Joe Garner Consulting property consultancy, comments: "Reservations, house sales and completions will decrease until interest rates drop and prices cool. Ideally, we will see an organic, controlled return to growth with interest rates stabilised around three to four per cent and supply increased to match demand. Boom and bust must be replaced with an ebb and flow of supply and demand to prevent overheating followed a sharp drop in house prices."