BELLWAY is raising cash to snap up land to build new homes amid increasing signs the housing market is starting to improve
The Newcastle-based house builder is to issue more than five and a half million new shares to pay for land in the South of the country, where it is selling more homes than in the weaker Midlands, Yorkshire and North West markets.
Around 60% of the 4,380 new homes that Bellway sold in the year to the end of July were in the South. Its total number of sales fell from 6,556 last year and the average selling price also dropped from £169,729 to £154,000.
The builder blamed the 9.3% drop in prices on incentives it took part in to kick-start the housing market, including discounting, part exchange and selling more homes as social housing.
But the group said it was now looking to “selectively increase work in progress” on its current developments and boost the number of new sites.
“In addition, in recent weeks the group has been successful in contracting to acquire land, predominantly in our southern divisions, at prices the board believes will deliver attractive margins,” said Bellway.
“We will continue to invest selectively to increase our land bank as attractive opportunities become available provided, of course, that the market remains stable.”
Although visits by potential buyers traditionally fall in the summer, Bellway said current sales rates were “encouragingly ahead of management's expectations”.
Its order book stood at £368m at the end of last month, just shy of the £370m on the books at the same time last year. It has also reduced its debts from £218m a year ago to £37m.
The company will announce its financial results on October. Its last set of half-year figure plunged the company into the red with pre-tax losses of £48.6m compared with a £96.9m profit the year before, after it took writedowns in the value of its land of £66.3m.
Today’s more positive trading update comes as the Royal Institution of Chartered Surveyors (RICS) said house prices should show a “slight rise” this year.
It is backtracking on its previous gloomy prediction that prices would drop between 10% and 15% during 2009. Yesterday, Halifax - the UK’s biggest mortgage lender - also changed its forecast from a 15% fall in prices to a drop of 7% or less after prices increased by 1.1% last month.
RICS senior economist Brigid O’Leary said: “There has been a clear change in the housing market over the past few months and, as a result, it is unlikely that we will now see the kind of house price falls widely predicted at the start of the year.
“Instead, the return of buyer demand and the limited availability of housing on the market could be enough to support prices so it wouldn’t be surprising to actually see prices increase further from here in the short term.”