Newcastle housebuilder Bellway has said it will focus less on London as better opportunities elsewhere in the country make the Capital less attractive.
Bellway - which built a record 10,900 new homes in its most recent financial year, a 5.7% rise - said it has gradually cut back on investment in London and expects the proportion of its homes sold in the capital to reduce in the foreseeable future.
Pre-tax profit rose 3.4% over the year, even as it warned that Brexit uncertainty could hit consumer confidence.
Jason Honeyman, Bellway’s CEO, said: “Excluding completions from Nine Elms, the group’s average selling price in the Capital was affordable at £413,359 (2018 - £375,956) and demand remains robust at this price point. The Group will continue to invest in financially viable locations in London where demand is strong, however the proportion of homes sold in London is likely to reduce in the foreseeable future, reflecting the positive availability of good quality land at attractive returns elsewhere in the country.”
He added: “In all regions, the market remained strongest for affordably priced homes in desirable locations. Divisions such as Manchester, East Midlands and Northern Homes Counties all performed well, each completing in excess of 600 homes, benefitting from positive market conditions, together with land investment and outlet openings over recent years.
“Our new Scotland East division, which opened on 1 August 2018 and is based in Livingston, completed the sale of 273 homes in its first year of trading, benefitting from investment in land and strong demand for new homes.”
The property developer said that revenue grew 8.6% to £3bn, while pre-tax profit reached £662.6m.
The company’s operating margin, the amount of profit it makes per pound of revenue after some costs, fell to 21% from 22.1%, the company said. It follows rival builder Taylor Wimpey, which in July said that its margins were declining.
“Bellway has been warning for some time that without the higher rates of house price inflation the housing market has enjoyed, house builders’ margins cannot help but go down,” said Robin Hardy, an analyst at Shore Capital.
He added: “Unless house price inflation is able to returns to the 4-5% level (last reported rate was only 0.2%) we cannot help but see all house builders being caught in this track.”
The company’s dialling back in London comes as areas like Manchester and the East Midlands performed strongly, Bellway said.
It built 1,010 homes in the capital, down from 1,118 in its last financial year.
The results follow a strong week for the home builders on the stock exchange after they were boosted by a seeming breakthrough in Brexit negotiations.
Bellway’s shares hit their highest point since January last year, jumping 10.5% on Thursday alone.
However, the company warned in Tuesday’s results that it is “mindful” that Brexit uncertainty could threaten consumer confidence. This could lead to fewer homes being sold, and reduce earnings per share.
Its Europe-based suppliers have started stockpiling to ensure they can meet demand in case of delays at ports, the company said.
