Mortgage affordability hits Bellway
UK housebuilder Bellway says reservation rates have fallen 28.4% year-on-year.
In its full year earnings, it reported that underlying pre-tax profit fell 18% to £532.6 million on a slightly better than forecast revenue of £3.4 billion. The company is having to absorb much of the recent cost price inflation which buyers are refusing to pay. Bellway has warned that given the reduction of its order book and lower reservation rates, there will be a 'material' reduction in volume output in this current year. Also, the business has uncovered structural defects in the concrete frame of a block of flats it built in London 12 years ago, for which it has set aside a £31m provision.
(AI Video Transcript)
The UK housing market
The UK housing market is going through some tough times, particularly for house builders like Bellway. They are facing pressure because many people can't afford the high prices and interest rates of new mortgages. Bellway recently reported their full-year numbers and things aren't looking great. Their underlying pre-tax profit has dropped by 18% to £532.6 million. However, their revenue was slightly better than expected at £3.4 billion.
High construction costs
But that's not all. Bellway is also dealing with higher costs for construction materials like brick, mortar, copper, wood, and wiring. These increased costs means they have to set aside more money. On top of that, Bellway is warning that they might not be able to build as many houses in the future because their order book is declining and fewer people are reserving houses. This is causing their share price to drop, which is not a good sign.
And there's another problem too. Bellway has discovered some structural defects in a block of flats they built in London 12 years ago. To fix it, they have had to create a fund of £31 million. This is a big blow to the company.
Bellway's struggles
Unfortunately, Bellway's struggles are also affecting other house builders. They are likely to face similar problems with affordability and their earnings are expected to take a hit. It's clear that the housing industry in the UK is dealing with multiple issues right now - reduced demand, higher construction costs, and concerns about the quality of past projects. It's a tough time to be in the housing business.
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