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Homebuilder Bellway makes record land investment amid rising house prices

Bellway has agreed to purchase 15,982 plots since the beginning of August

Bellway (LON:BWY), the FTSE 250 homebuilder, said on Tuesday that it expects demand for new homes to be strong for the remainder of the financial year, on the continued support from the government, as well as low lending rates.

The company expects to sell in the region of 10,000 homes during the year ending in July, up from 7,522 units the year before.

Bellway also confirmed it has made a record investment in land since last August.

The homebuilder has agreed to purchase 15,982 plots since the beginning of August, well up 10,620 during the 2019 financial year.

Bellway said its most recently bought plots are valued at £891m and that the average gross margin is around 23%.

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Over the same period of time, house prices have jumped, down in part to the stamp duty holiday.

“Bellway is making hay while the sun shines. Amid strong demand for homes, the housebuilder is setting itself up for the future with its record investment in land acquisitions,” says AJ Bell investment director Russ Mould.

“While land prices may not be quite as depressed as they were in the initial stages of the pandemic, it is still an opportune time to buy and this should have positive implications for the profitability of homes built on these plots and for future growth.”

“The stamp duty holiday has clearly been a driver for demand but there are other factors at play as people look to get more space, largely for home working, in the wake of the pandemic. This in turn means people are buying more of Bellway’s larger, higher quality homes, which is driving up average selling prices,” Mould added.

“The main negative is the rising raw material costs and difficulties in securing skilled labour. At the moment these headwinds are having only a limited impact as house prices surge ahead. However, Bellway and its peer group may face a more difficult situation if the housing market cools.”

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