Bellway, the housebuilding group, said yesterday that activity in the housing market remained depressed in June and July, with home reservations falling by around 45% in the second half of the financial year.
Bellway, the housebuilding group, said yesterday that activity in the housing market remained depressed in June and July, with home reservations falling by around 45% in the second half of the financial year.
The company said in a trading update that the credit crisis, which has restricted the supply of mortgages, and a lack of customer confidence continued to induce low levels of activity in the housing market.
The Royal Institute of Chartered Surveyors this week said sales per surveyor were the weakest since records began in 1978, while Halifax, Britain's biggest mortgage lender, said house prices had fallen by more than 10% in the last year and mortgage approvals were at record lows.
In addition, the Bank of England's inflation data released on Wednesday hinted that interest rates would not be cut anytime soon, leading to sharp falls in housebuilder shares.
Bellway, which is based at Newcastle-upon-Tyne, said a record number of people are pulling out of purchases. Mortgage approvals dropped in June to the lowest since at least 1999 and house prices fell sharply in July. The company expects to miss current analyst estimates for full-year profit, and the housing slump is only halfway over, chief executive John Watson said.
Bellway shares, which have underperformed the housebuilding sector by around 35% in the last year, closed 16.5p down at 560p - a loss of 2.8% - in London trading.
"Housebuilders' shares fell between 7% and 15% across the sector yesterday, no doubt in anticipation of a gloomy trading update from Bellway this morning, but even after taking this fall into account the sector remains around 70% above its July lows," said analysts at the Cazenove brokerage.
"We continue to believe that the relief rally following Barratt's refinancing deal has been overdone and that we will see share price weakness in the lead-up to the reporting season, which started today (Thursday)," they added.
Bellway said its home sales were down 14.2% year-on-year to 6556 units. The builder's average selling price dropped 2.5% to £169,000, and is likely to drop by 10% by the end of next year, Watson said.
The increased use of incentives such as free carpets and curtains narrowed operating margins from last year's 18.7%.
The group, which was founded in 1946, is hoping its forward order book will help it weather the storm. Its future sales stood at £370m as of July 31, down from £594m the year before.
In Scotland, the housing market has held up better than in England but Bellway has had to reduce prices on houses in some areas north of the border, including the Avenues project in Uddingston, near Glasgow, a popular development. A four-bedroom detached house in the Avenues that was priced at £297,995 is now listed at £274,995.
While acknowledging that trading conditions were poor, the company tried to sound upbeat.
"Bearing in mind market conditions, and the fact that cancellation rates increased to unprecedented levels towards the end of the financial year, we consider this to be a satisfactory performance," the company said.
The housebuilder highlighted that it currently did not envisage widespread land writedowns and was operating well within its banking facilities, in contrast to peers such as Taylor Wimpey or Barratt Developments.
It also pointed to reduced expenditure on land and tighter controls on work in progress, as well as to an amalgamation of some divisions to cut overheads.
Watson has merged divisions and closed three offices to reduce overheads, while the company said yesterday that it is cutting land purchases.
