Bellway, one of Britain’s biggest housebuilders, has said it is cutting jobs as it anticipates a property market slowdown in the coming year because of higher mortgage rates and the closure of the help-to-buy programme in March.
The construction company said it would shut two of its divisions and slow activity in a third, as it predicted that house completions would “decrease materially” over the next 12 months.
As demand for houses has fallen sharply, with higher interest rates making a home purchase unaffordable for many, Bellway has decided to close its South Midlands and London Partnerships divisions, and reduce production in its Durham business. The sites in those divisions will be transferred to other businesses.
Bellway will also reduce its 3,000-strong workforce and began consulting on the job cuts on Monday. A spokesperson declined to specify how many jobs would go, but said it would be a “very small percentage overall”.
Mortgage payments for households have risen sharply in response to higher interest rates. Last week the Bank of England instituted its 14th base rate increase in a row, taking the figure to 5.25%, and predicted borrowing costs would stay high for at least the next two years. The average two-year fixed residential mortgage rate is now 6.83%, according to Moneyfacts. Bellway is using more incentives to lure buyers, such as a mortgage offer at the start of the year, which paid up to £24,000 towards mortgage payments for up to two years.
Jason Honeyman, Bellway’s chief executive, said: “The backdrop of macroeconomic uncertainty and cost of living pressures affected consumer demand during the year and, given affordability remains constrained by higher mortgage interest rates, underlying trading conditions are likely to remain challenging in the near term.
“In the current financial year, given the level of the order book and prevailing low reservation rates, legal completions are expected to decrease materially.”
Bellway’s overall reservations, including social homes, fell by 28.4% to 156 a week in the year to 31 July, with reservations for private homes down 35.9% to 109 a week. Its cancellation rate rose to 18% from 13% in 2022.
The group’s order book declined to 4,411 homes, worth £1.2bn, at the end of the year, from 7,223 homes, worth £2.1bn a year, earlier. To adjust to the housing downturn, Bellway bought much less land – just 4,715 plots compared with 19,089 in 2022.
The builder completed 10,945 homes compared with 11,198 in 2022, with the average selling price dropping to £310,00, from £314,399.
Housebuilders have benefited from the government’s help to buy programme, designed to help first-time buyers and home movers. It accounted for more than a fifth of Bellway’s completions.
Aynsley Lammin, an Investec analyst, said: “Trading conditions have clearly waned over recent weeks and Bellway is reacting to the weaker trading trends.”
Asked whether Bellway was doing worse than rival housebuilders, Lammin said: “Bellway had been more focused on growth than others so probably have more room to slow their divisional growth and even merge two divisions or close a smaller division without hitting their ability to deliver on a two- to three-year view.
“I don’t think they have been hit harder but just have more less mature divisions and therefore room to reorganise for what looks likely a tough trading period over the next six-12 months.”
