Soaring house prices eases the pressure for big builders | City & Business | Finance
The two housebuilders said a lack of supply and strong demand is keeping values high, despite the cost of living squeezing spending power.
The Nationwide has said annual house price growth slowed last month from 12.1 per cent to 11.2 per cent.
At its full-year trading update, Bellway’s chief executive Jason Honeyman said that even though it has had to contend with rising energy and raw material prices, supply chain disruption and increased wages, as well as the upward pressure on housing, its profit margin rose from 17 to 18.5 per cent.
He added: “Overall, build-cost inflation has been offset by house price gains and we expect this trend to continue, with our strong forward-sales position supporting our drive to optimise prices on future reservations.”
The value of Bellway’s order book has grown this financial year 27.3 per cent to £2.4billion, with completions up around 10 per cent to 11,100 homes.
Similarly, Crest chief executive Peter Truscott said that its margins had risen by 270 basis points from 12.3 to 15 per cent thanks to rising house prices.
At the company’s interim results he said: “No one in the construction sector is immune from the current impacts of input cost inflation.
“However, we are managing to successfully offset this with sales price inflation in a market with strong demand and relatively poor levels of supply.”
The builder’s revenues for the six months to the end of April rose 12.3 per cent to £364.3million.
It would have made a pretax profit of £52.5million but for setting aside £105million to cover the cost of critical safety work on tall buildings in the wake of the Grenfell disaster.
Russ Mould, investment director at AJ Bell, said that the shift towards hybrid working should support housebuilders.
He said: “Those who can afford it are often looking for extra space to accommodate a home office.
“Supply of new homes remains a long-term issue in the UK and this is helping to support the market.”