Real estate crisis forces Bellway to cut 90 jobs: Rising mortgage caused housing demand to collapse
One of Britain’s biggest contractors is cutting jobs and warned of a tough year ahead as the property crisis continues.
Painful rises in mortgage rates and the cancellation of the Help to Buy program in March have caused demand for homes to plummet.
Now Bellway is closing its South Midlands and London Partnerships divisions in a restructuring that will cost 90 jobs.
It warned that home sales would “fall significantly” in the coming year.
Bellway CEO Jason Honeyman warned: “Cost of living pressures have impacted demand and as affordability remains constrained by higher mortgage rates, trading is likely to remain challenging.”
Downtools: Bellway is closing its South Midlands and London Partnerships divisions in a restructuring that will cost 90 jobs
He added: “Given the level of the order book and the low reservation rates, the number of legal deliveries is expected to decrease significantly.”
In the 12 months to July, the value of its forward orders fell to £1.2bn, down from £2.1bn a year earlier, while weekly reservation rates fell 28.4 per cent.
Housing income fell 3.4 per cent to £3.4 billion for the fiscal year, while the average sale price fell from £314,399 to £310,000.
A string of interest rate hikes over the past year has made many buyers’ dream of owning their own home out of reach.
The Bank of England pushed through its 14th consecutive rate hike last week, pushing the level to 5.25 percent.
Bellway is still trying to entice disillusioned buyers by making an offer to pay up to £24,000 in mortgage payments for up to two years.
Mortgage rate hikes in June and July hammered demand particularly hard, Bellway added shares fell 0.9 percent or 20 pence to 2196 pence yesterday, while the stock fell about 5 percent over the past year.
AJ Bell investment director Russ Mold said, “The stocks are holding up, so markets may have already priced in much of the bad news.”
There is some optimism that the Bank of England may not need to raise its key rates much further as inflation has fallen this summer.
It fell to 7.9 percent in June from 8.7 percent in May, according to the latest data from the Office for National Statistics.
And many big lenders cut their mortgage rates this week, including big names TSB, Nationwide and HSBC.