UK housing market starting to settle, Bellway says

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The UK housing market is returning to more settled conditions after a long period of blistering growth, according to housebuilder Bellway.

In a trading update for the 18 weeks to November 30, Bellway, one of Britain’s biggest housebuilders, said that while demand for new housing across the country remained “resilient”, its trading was returning to “a more normal seasonal pattern”.

The announcement sent shares down 3.5 per cent to £18.24 at lunchtime on Friday.

The company’s suggestion of a more tempered market chimes with data from the Halifax, which found that UK house price growth continued to cool this Autumn, with a 0.7 per cent rise to the three months to November. Halifax’s quarterly index has now declined for four consecutive months.

The group averaged 147 home reservations per week between August 1 and November 30, up from 144 in the same period a year earlier, the company said.

Bellway was looking forward to “another significant increase in profitability” this year after a robust start, with reservation rates up on last year as a result of “positive market conditions” across London and the rest of the UK.

Ted Ayres, Bellway chief executive, said: “Demand for new housing is resilient across the country and continues to be supported by the availability of affordable, higher loan to value mortgages and in particular, the continuation of the government’s Help to Buy scheme.”

In the land market, Bellway has spent £233m on land and land creditors during the period, up from £121m last year, and has heads of terms agreed on further 4,400 plots worth £320m.

“Market conditions with respect to both sales and land buying continue to be favourable and provided they remain unchanged, Bellway should be able to deliver significant earnings growth and ongoing improvements in return on capital in the year ahead,” the company said.

147

Average home reservations per week

The company said it expects operating margins to be about 20 per cent for the year ending July 31 2015, up from 17.2 per cent in the same period last year.

Last month Mr Ayres warned that his company and peers such as Barratt, Taylor Wimpey and Berkeley Homes could not build enough houses to meet the widely accepted goal of 200,000 new homes a year, despite record profits.

Whitehall would have to step up its spending on affordable housing to solve the country’s housing shortage, Mr Ayres said.

Despite the tempered outlook, analysts remained upbeat on Bellway’s prospects.

“The group continues to perform very strongly and is on track to deliver strong volume growth at impressive margins in the current financial year, with shares recently enjoying a strong bounce,” noted Aynsley Lammin, analyst at Citi.

Bellway shares have gained 15.8 per cent since the start of this year.

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