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Housebuilder Bellway profits from buyer confidence

By This Is Money
Updated: 05:46 EDT, 7 December 2010

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Buyer confidence returned to the housing market following the government spending review according to housebuilder Bellway, which expects a 20% hike in interim profits.

Bellwether: Housebuilder said decline in consumer confidence has levelled out

The Newcastle-based company said home reservations had increased since the announcement, although it confirmed they were still lower than a year ago.

Bellway previously said it had not seen the traditional autumn uplift as buyers delayed purchases until George Osborne announced his cuts on October 20.

But it said the decline in consumer confidence had now levelled out and added it was encouraged by people buying homes at a time that is normally slow for the housing market.

The number of sales secured for this financial year is 4% higher and the company expects the number of properties it sells in the six months to January 31 to be the same as last year.

With first time buyers struggling to get onto the property ladder, the company has moved into selling more expensive homes - its average sale price has increased 8% to £167,600.

The company said pre-tax profits could lift to £22.8m in the first half, although it stressed the full-year result depends on the key spring trading period.

Shares in Bellway leapt 45.5p (8.2%) to 604p following the announcement.

The positive news from Bellway comes a week after fellow housebuilder Berkeley Group also posted an 18% rise in half-year pre-tax profits and a 20% surge in sales reservations.

Bellway plans to increase the rate at which it builds new homes and will have 200 sites for sale in the new year, up from 185 currently.

The group's land buyers bought 1,260 plots in the past four months and are actively looking for more.

Although the current level of reservations is ahead of expectations, Bellway stressed the market continues to be 'tough and testing' and sales in 2011 will be dependent on banks offering affordable mortgages to its customers.

Bellway is the only major housebuilder to currently pay a dividend. It bounced back from making a pre-tax loss of £29.8m in the year to July 31 2009 to record pre-tax profits of £44.4m the following year.

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