Housebuilder Warns First-Time Buyer Scheme Could Slow Property Market

A major UK housebuilder has cautioned that a new government scheme aimed at helping first-time buyers could inadvertently slow the property market if not accompanied by further planning reforms. Bellway, a prominent housebuilder, stated that while the 'Your First Home' initiative has the potential to offer meaningful support, buyers might delay their purchasing decisions until more details are released.

Bellway Chief Executive Jason Honeyman noted that the period leading up to the scheme's launch could influence when prospective customers decide to buy. The 'Your First Home' scheme, announced by the Prime Minister, is designed to assist first-time buyers in England with a smaller deposit, requiring a 2.5 percent down payment. Bellway acknowledged the scheme's aim to increase homeownership and accelerate the delivery of new homes but stressed the need for it to be paired with additional planning reform.

Housebuilders have increasingly called for planning reform, arguing that current regulations are insufficient to meet the government's target of building 1.5 million homes. Bellway highlighted that ongoing planning delays, coupled with rising mortgage costs and broader economic challenges, contribute to an uncertain outlook that could restrict housing delivery.

The company also anticipates pressure on its operating margins due to cost increases, partly attributed to the conflict in the Middle East. Bellway reported receiving requests for price increases from suppliers and subcontractors but indicated that it has negotiated robustly to limit the impact on agreed rates. Build cost inflation is expected to be between three and four percent this year, potentially leading to a decrease in build volumes in 2027, from 9,695 homes currently to between 9,000 and 9,400.

In August, Bellway had urged the government to immediately reduce stamp duty to support a property market recovery. Investors are now looking to Burnham's 'Your First Home' scheme, seen as a potential revival of the earlier Help To Buy initiative, to bolster housebuilders.

Bellway's shares have experienced a more than 25 percent decline year-to-date, though they saw some recovery following the announcement of the 'Your First Home' scheme. For the year, Bellway reported revenue of £3.16 billion, a 13.4 percent increase and exceeding analyst expectations. The company also announced strong adjusted operating cash flow, up 36 percent to £868.6 million, enabling a £150 million extension to its share buyback program. However, underlying pre-tax profit rose 5.7 percent year-on-year to £305.7 million, falling short of forecasts.

Victoria Scholar, head of investment at Interactive Investor, commented that despite weaker margins and mortgage affordability concerns, Bellway shares were rallying due to its share buyback, revenue growth, robust housing completions, and focus on cost savings. She also noted a broader positive trend in the sector, with other housebuilders like Taylor Wimpey, Barratt Redrow, and Persimmon also seeing strong gains.