Housebuilder Warns First-Time Buyer Scheme Could Slow Property Market

Bellway, a major UK housebuilder, has cautioned that the government's new 'Your First Home' scheme for first-time buyers could inadvertently slow the property market by causing potential purchasers to postpone their buying decisions. The scheme, announced by the Prime Minister, aims to assist first-time buyers in England with a reduced deposit of 2.5 percent.

In a statement to investors, Bellway CEO Jason Honeyman indicated that while the initiative has the "potential to provide meaningful support," the period leading up to its launch might influence when prospective customers decide to buy. He emphasized that the scheme's success would also depend on further planning reforms to meet housing delivery targets.

Housebuilders have increasingly called for planning reform, arguing that current regulations are insufficient to achieve Labour's goal of constructing 1.5 million new homes. Bellway highlighted that ongoing planning delays, coupled with rising mortgage costs and broader economic uncertainties, contribute to a challenging outlook that could constrain housing development.

The company also anticipates pressure on its operating margins due to cost increases, particularly from suppliers and subcontractors, influenced by the Middle East conflict. Bellway expects build cost inflation to be between three and four percent this year, which could lead to a reduction in build volumes in 2027, projecting between 9,000 and 9,400 homes compared to the current 9,695.

Bellway had previously urged the government in August to reduce stamp duty immediately to bolster the property market. The shares of Bellway, which have fallen over 25 percent year-to-date, saw some recovery following the announcement of the 'Your First Home' scheme.

Despite these concerns, Bellway reported its revenue for the year reached £3.16 billion, a 13.4 percent increase and exceeding analyst expectations. The company also announced a robust adjusted operating cash flow of £868.6 million, a 36 percent rise, enabling an extension of its share buyback program by £150 million. However, underlying pre-tax profit was £305.7 million, up 5.7 percent year-on-year but below forecasts.

Victoria Scholar, head of investment at Interactive Investor, noted that Bellway shares were rallying due to the share buyback, revenue growth, strong housing completions, and cost-saving efforts, even with weaker margins and mortgage affordability issues. She added that other companies in the sector, including Taylor Wimpey, Barratt, Redrow, and Persimmon, were also experiencing gains.