Bellway: new figures show demand falling away

Bellway is the latest housebuilder to offer an insight into the dire state of the private residential market.

Since the start of February the deterioration in the market has resulted in a 31% drop in the rate of reservations.

This means Bellway’s expectations of volume for the year ending 31st July 2008 have now been revisited - a fall of 5% - 10% in the number of homes sold had already been flagged up, compared to last year's level of 7,600.

But it is now expected that the fall will be worse. A drop of 10% - 15% is now on the cards.

On top of that more incentives are being dangled in front of buyers. That means operating margins will be eaten back by 1% - 1.5%.

Not that Bellway is left without profit - last year’s margin ran close to 19%, so plenty of room for a little fat to be trimmed away.

The total order book stands at £706 million.

Bellway said that “there has been no sign of the normal spring selling surge” with the Midlands, Yorkshire and the North West have been particularly hard hit.

Thames Gateway and Scotland have been resilient but the restricted mortgage supply, combined with a sapping of consumer confidence, is leading to further market weakness.

Overhead and work in progress levels have, and continue to be, reviewed in light of these changing conditions, in an effort to give the company a leaner cost base.

New land opportunities are still being procured, but only on a highly selective basis, and with the emphasis on housing rather than flatted schemes.

Bellway anticipates that its gearing position “should remain at a comfortable level” below 30% at the end of July.