It has been a challenging couple of years for housebuilders’ P&L sheets, with the end of the Help to Buy scheme, unfavourable interest rates harming mortgage availability and escalating costs.
Those challenges were evident in Newcastle-based Bellway’s preliminary results released this week, which showed a 30% drop in revenues and profits more than halving. But despite the ugly numbers, the group’s outgoing group finance director, Keith Adey, believes a “reset” in the market has come following two years of lacklustre results.
He says his firm - one of the country’s largest builders - is ready to “step up to the challenge” laid down by the new Labour Government’s manifesto promise of delivering 1.5m homes over the next five years.
“The main positive is the change in sentiment towards planning,” Mr Adey said. “If you look over the past 10 to 15 years or so, when housing output has increased year-on-year, that’s been on a backdrop of a reasonably positive planning environment. But over the past couple of years - when the previous Government was looking to exit - the planning environment changed and became more difficult.
“The more positive planning prognosis, overlaid with some quite ambitious housing targets of 1.5m homes over this parliament, can only be a good thing for housebuilders. We’re not only suggesting that the whole industry will be able to step up so quickly to meet that target, however, at least it’s going in the right direction.”
The new Government's change in approach comes on the back of a planning period “fraught with delays”, according to Bellway. Earlier this year the Competition and Markets Authority identified understaffed local authority planning departments, out-of-date local plans in some areas and a lack of strong incentives to deliver new homes, as well as dilution of housing targets by the previous Government late last year, as chief reasons for the Ƶ’s lacklustre delivery of homes.
But Simon Scougall, Bellway’s chief commercial officer, points to Housing Secretary Angela Rayner’s approval of hundreds of new homes at Sniperley Farm, not far from Durham city centre, as evidence the wind may be changing. The 2,000-home scheme had been called in by Conservative Secretary of State Michael Gove and had stalled before being restarted thanks to August’s decision.
Planning reform is one thing, but stoking demand is equally important for firms like Bellway. Easing interest rates are giving cause for optimism, but The House Builders Federation’s ‘Broken Ladder’ report recently found that the average first time buyer has to save half of their earnings for almost a decade to afford a deposit.
“I think there’s still a gap in the market on the pricing side for consumers,” Mr Adey said. “Rates are 4-5% now and there’s been much more stability in the past six months. That’s been a really healthy piece for us. If you get a few more rate cuts, that will bring a bit more confidence to the market - that will maybe bring a few more people back into the game, so to speak. In addition, there’s perhaps a gap in the first time buyer side of the market. You’re still paying a substantial premium if you’re a first time buyer and you need a 90%+ mortgage, if indeed you can get one.”
Mr Adey said any further support must be done in a “considered and proportionate way” but that such a move could significantly boost the wider housing market. The Government has talked of extending the mortgage guarantee scheme introduced by the Conservatives in 2021 and which lenders were offered a guarantee on the top slice of the mortgage, in case of losses suffered in a repossession.
Government support aside, Bellway sees the ingredients for growth are there. In its latest results, Bellway said completions had fallen to 7,654 from 10,954 the year before. And in its current 2025 financial year it is eyeing 8,500 homes - a level Mr Adey said was “pretty much a given”, pending no major market upsets.
Further growth is expected beyond that, with plans afoot to reopen the firm’s shuttered South Midlands division - one part of the business which was closed down amid a round of cost cutting last summer, in the face of poor market conditions. As it stands, the company has the capacity to produce about 11,000-12,000 homes per year and as recently as 2021 - before the market took a downturn - it harboured long term ambitions of producing 16,000-18,000 per year.
Talk of reversing prior decisions to scale back the business point to confidence that this notoriously cyclical market could be about to experience an uptick. Mr Adey said: “If we can get over this Budget season and the uncertainty in the market, and perhaps get a bit of positive momentum, that’s a really good position from which to deliver compounding growth for financial year 2026.”
Bellway’s longer term confidence is evidenced by its land buying activities. In 2024 it entered into options agreements for 35 sites, compared with 19 the year before. At the end of July, the firm had land holdings of 45,500 plots, up from 43,600 plots in 2023 - a measure which has grown by 77.7% in the last five years. Mr Scougall described it as an “investment in the future”.
It isn’t the only route to growth that Bellway has considered. Earlier this year the firm walked away from plans to buy smaller rival Crest Nicholson - incurring £5.4m in the process. The bid was part of a flurry of consolidation in the sector, including rival Barrat’s acquisition of Redrow and talk earlier this year of Persimmon considering an offer for Legal & General’s Cala Group, though it was subsequently sold to investors Sixth Street Partners. All that plus Crest Nicholson rebuffed a rival approach to Bellway’s, from Avant Homes.
Asked about why the Crest acquisition was abandoned, Mr Adey said: “The ‘prize’ - to use Jason’s (Honeyman) words - was around the land side of the business and the immediate scale that could bring to a business such as Bellway. He thought the people were good, the landbank was ripe for development but having been through the process and having spent a lot of time, a lot of blood, sweat and tears, we concluded our standalone prospects are better.
"We think we can deliver better returns for lower risk and that’s pretty much why we’ve put out our fairly ambitious growth plan over the next two years.”
