Bellway has said demand for properties has dropped quite significantly since the summer and it expects the trend to continue over the next 12 months, reflecting the wider slowdown in housing market activity.

The housebuilder predicts that residential property sales will be roughly flat over the next year against a backdrop of increasing interest rates and a deteriorating economy that is likely to enter into recession.

The company completed a record 11,198 homes in the year to 31 July, up 10.5% on the previous year, as a booming housing market drove £3.5bn of revenues, up 13% and also a record. However, property sales have dropped sharply, as housebuilders are now “in the eye of a political storm,” according to the head of Bellway.

“Last year was a very strong year for us . . . Financial year 2023 feels very different,” said Jason Honeyman, chief executive of Bellway. “Private sales have reduced by a third since the start of our new financial year. That’s a concern for us. We feel like we’re in the eye of a political storm.”

According to Bellway, buyers had reserved an average of 191 properties a week since the start of August, compared with 218 a week in the corresponding period 12 months earlier.

Barratt Developments, also warned last week that sales were slowing as a result of the sharp rise in mortgage rates in recent months, and particularly in the wake of the now former chancellor Kwasi Kwarteng’s “mini” Budget last month.

Honeyman cautioned that even with the government reversing course under new chancellor Jeremy Hunt, “the reality is that mortgage rates are not going to get back to where they were.”

The slowing sales market is likely to have a knock-on effect on new development.

Bellway said it would “take a more cautious approach” to investing in new land until the economy was more stable.

Analysis:

Shane Carberry, equity analyst at Goodbody, said: “Crucially for the housebuilding sector, while the Chancellor confirmed several reversals on last month’s mini-Budget, the cut in stamp duty has not been scrapped. This saw an immediate and significant boost for housebuilders, including Barratt Developments, Bellway and Persimmon, whose share prices had increased sharply in early trading on Monday. However, these have been trending down since, as the sector continues to feel feeling the impact of increasing economic uncertainty and inflationary pressures, with sales slowing as concern grew about the potential for runaway mortgage rates.

“Following this, Bellway’s latest trading update for FY22 this morning again highlighted the challenging backdrop housebuilders are facing, with softening demand and cost inflation not abating. With uncertainty also surrounding mortgage rates in the short- and medium-term future, Bellway has tapered its volume guidance for FY23 given the more challenging macroeconomic backdrop.

“While Jeremy Hunt’s intervention provides some cause for optimism for the sector, it won’t stop demand for housing from cooling. Indeed, the sector is faced with many issues and there will undoubtedly be more challenges ahead as the housing market struggles with affordability issues in the context of the cost-of-living crisis.

“But the Chancellor’s decisions on SDLT is only small in the grand scheme of things. The next few weeks and months will be just as important as we learn more about whether previous Government plans for planning deregulation and investment zones will be kept, and whether this will provide another boost to the sector by lowering building costs through supply side reform.”

Sharp fall in new-build reservations stokes fears of a housing market downturn