Demand for new UK homes still outstrips supply, say building

Bellway and Crest Nicholson, two of Britain’s biggest housebuilders, have said demand for new houses continues to outstrip supply, pushing up prices and offsetting the rising cost of building materials and energy.

Bellway posted strong sales for the four months from 1 February to 5 June, when house reservations averaged 253 a week, compared with 239 in the same period last year.

The company expects to complete more than 11,110 homes in the year to the end of July, a 10% rise from last year. Material shortages are starting to ease, although bottlenecks remain at regional level, affecting bricks, blocks and roof tiles in particular.

Jason Honeyman, the Bellway chief executive, said: “Demand is strong, reservations are ahead of last year and our order book remains substantial.

“Overall, build cost inflation has been offset by house price gains and we expect this trend to continue.”

The average selling price of a Bellway home is expected to exceed £305,000 this year.

There are some signs that the housing market is starting to cool amid the worsening cost of living crisis. Halifax, one of the UK’s biggest mortgage lenders, last week reported that annual house price growth had slowed but remained in double digits.

Crest Nicholson said it built 1,096 homes in the six months to 30 April, up nearly 8% from the same period last year. It made an adjusted profit before tax of £52.5m, up from £36.1m, and raised its full-year forecast to between £135m and £140m.

Peter Truscott, the Crest chief executive, 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. Finally, the tapering off of Help to Buy, which is due to end in April 2023, has had no measurable impact on our sales rate to date.”

He said Crest’s developments were often in areas that are benefiting from the rise in home working since the Covid-19 pandemic. “We continue to see this rationale being cited by customers in their reasons for moving home,” he added. The firm is opening three new divisions, the first two in Yorkshire and East Anglia.

Bellway said the government’s help-to-buy scheme was used by customers in 16% of house purchases, compared with 22% last year and 39% in 2020. It is mostly being used for apartments in and around London, but Bellway has been building fewer apartment blocks in recent years. At the same time, it said the availability of higher loan-to-value mortgage loans was “gradually improving”, allowing people to buy with smaller deposits.

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More than 35 homebuilders agreed in April to pay £2bn towards fixing unsafe cladding on high-rise buildings in England after the 2017 Grenfell Tower fire, but a further £3bn is needed. Michael Gove, the housing secretary, said the further £3bn would be raised by an extension to the building safety levy, forcing industry to pay for the remedial work on buildings where the developer cannot be traced or forced to pay up.

Bellway said it had set aside £187m since 2017 to cover cladding work to apartment buildings more than 11 metres in height, and in April it pledged to cover buildings constructed since April 1992, which will cost a further £300m. It has appointed a managing director to lead its new building safety division to oversee the work.

Crest took a £48m charge related to cladding work on buildings taller than 18 metres last October, and said it recognised the “significant distress caused to residents”. When it signed the pledge in April to carry out work on all buildings more than 11m tall, it took a further £105m charge. With regards to fixing “orphaned” tower blocks, Crest said it would not pay towards any buildings it had not constructed.