BELLWAY, the house builder, has warned of a tough remainder of the year as first-time buyers struggle to cope with new lending requirements.
Britain's fourth-largest house builder said yesterday that, while the market in Scotland remained strong, across the UK it is being forced to increase incentives offered to maintain sales.
Finance director Alistair Leitch said since the deepening
of the credit crunch, many mortgages are now moving out of reach of first-time buyers because of strict deposit requirements.
"There are instances of mortgage lenders dropping their loan to value ratio to 70 per cent (from up to 100 per cent]. Now, with the best intentions in the world, where is a first-time buyer going to find 30 per cent of even the most affordable properties?"
A drop in first-time buyers is likely to have a particular impact on Bellway, which focuses on the more affordable sector of the market, with an average sales price of less than £175,000.
Yesterday it reported a 4 per cent fall in pre-tax profit £96.9 million despite turnover increasing 1 per cent to £581.5m. House completions were virtually flat at 3,252. Bellway said the performance was "creditable against a backdrop of an uncertain market place".
Leitch said yesterday that while reservations were actually ahead of the same time last year, this was being boosted by strong sales to housing associations over private buyers. Meanwhile sales to private sellers were being buoyed by the increasing use of incentives, such as helping buyers cover stamp duty.
"We're having to do more in terms of incentives to keep the transactions alive, we're seeing more visitors to sites, but it's not yet translating into a spring surge of sales", Leitch said. "So I think we're in for a long hard 2008 and it just remains to be seen how long it will last into 2009."
Bellway has targeted sales of 10,000 homes a year by 2010, though Leitch admitted yesterday that the target "will not be achieved" because of the current slowdown.
The picture for the company is much brighter at Bellway's two Scottish divisions, which combined, grew output by 15 per cent in the six months to 31 January compared to a year earlier. Bellway's Scottish business is split into east and west divisions and performance at both has been strong.
Trading also remains strong in the south of England, in particular in Essex and the Thames Gateway, where the first half of 2008 was also ahead of 2007.
Despite having to consider "anything and everything" to maintain sales, Leitch said the company was positioning itself for a return to growth when the market turns by taking advantage of a weak market to improve its land bank, with signs in recent months that land with planning permission is falling.
The full article contains 480 words and appears in The Scotsman newspaper.
