Rising home prices lift Bellway profits

NewBuy scheme boosts the housebuilder

Bellway, one of the UK’s largest housebuilders, has reported a near 50 per cent rise in profits in the second half of last year, as it sold more homes at increased prices, aided by government schemes to boost the mortgage market.

Sales have continued to rise in the six weeks since February 1, the company added – in spite of freezing temperatures during the traditionally strong spring selling season.

Bellway’s sales reservations in this period are more than 10 per cent higher than a year ago, and are running at 133 a week. This improvement means the builder has already achieved 94 per cent of its full-year sales target.

Ted Ayres, chief executive, said this, together with increased government support for the industry in last week’s Budget, bode well for the rest of the year.

“It feels quite good out there, despite the rest of the world,” Mr Ayres said on Tuesday. “We’re targeting a 5 per cent annual increase in build volumes but we might raise this further, depending on how long the spring selling season lasts.”

Along with rivals Barratt, Persimmon and Redrow, Bellway has delivered soaring profits as it recovers from the 2007 house price crash by developing land bought at discount prices.

Pre-tax profits jumped 48 per cent to £59.9m in the six months to January 31 as the average selling price increased 2.6 per cent to £187,426. The Newcastle-based housebuilder sold 2,597 homes in the first half of its year, 5.8 per cent more than a year earlier.

The government’s NewBuy scheme – under which buyers only have to stump up a 5 per cent deposit for newly built homes – accounted for 11 per cent of sales in the half-year.

Mr Ayres welcomed the decision to introduce more generous measures, including removing the requirement that housebuilders contribute 10 per cent to shared equity schemes.

“The government has said we don’t have to put anything into the pot and that is very good news,” Mr Ayres said. “It is good that the chancellor is putting his weight behind the sector. He went a lot further than everybody expected.”

Under the Help to Buy scheme, buyers with a 5 per cent deposit will be able to take out a 20 per cent loan from the government.

● FT Comment

Bellway’s shares are already up 15 per cent in the year to date and trade on 1.2 times book value for 2013, compared with 1.3 times for the rest of the housebuilding sector (excluding Berkeley). ­Nevertheless, they should benefit further from the government’s “Help to Buy” scheme, which will free up the company’s balance sheet and help it to boost volumes, and look a good buy.

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