Bellway was the latest housebuilder to announce very respectable profits for 2022 but warn 2023 will be a much tougher environment to operate in.
Bellway profit before tax rose 22.5% to £650.4m in 2022, up from £530.8m in the year prior. Higher profits were a result of surging revenue as completions increased 10.5%.
“The annual profit announced by Bellway looks impressive but there’s a good chance it won’t enjoy such a prosperous 12 months for quite some time to come,” said Russ Mould, investment director at AJ Bell.
“For years housebuilders have enjoyed almost perfect conditions. Low mortgage costs ensured there were plenty of potential purchasers, government support helped to stimulate demand and there was an undersupplied market which helped prop up prices.”
However, 2022’s positive results were unlikely to be replicated in 2023 as rising interest rates and the cost of living crisis dented demand for housing.
The builder said they expected 2023 sales volumes would be largely inline with 2022 and pinned hopes on the autumn and spring selling seasons.
Bellway said they expected average prices to fall to around £300,000 in 2023 from an average of £314,399 in 2022, although they attributed this to the sale of more affordable homes as opposed to a slowing market.
“Bellway’s commentary on recent trading shows clear signs of a drop in demand, similar to that evident in a recent update from Barratt Developments,” Mould said.