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Housebuilder’s Profits Soar Thanks to Help to Buy

Housebuilder Bellway is experiencing massive profits thanks to the government’s Help to Buy scheme.

Representatives also confirmed that the company had seen little evidence of the typical pre-election slowdown. Bellway’s pre-tax profits increased by 53%, and the company’s dividend has raised 56% to 25p a share. These results boosted its shares and had a lifting effect on the rest of the sector.

The housebuilder, which has progressed from constructing 4,380 homes in 2009 to approximately 7,500 so far this year, said that its order book currently stood at £1.1bn, or 35% ahead of 2014.

While building material costs have stabilised, Bellway said that it was still experiencing difficulties with rising labour costs in and around the capital, where the pay rate for subcontractors are climbing at around 10% a year.

Help to Buy, which makes it possible for first-time buyers and movers to purchase a house with only a 5% deposit, has resulted in a housebuilding surge since it was implemented two years ago. Bellway chief executive Ted Ayres said that thanks to the mortgage guarantee scheme, such as the fixed 1.89% deal from Nationwide, mortgage lenders were now offering competitive rates.

Although the general election results looked to be the closest in years, Bellway’s reservations have gone up year-on-year since December. Mr Ayres said that the buying public wasn't deterred from purchasing new homes, although pre-election times typically experience a slowdown.

He opined that people were less worried because all the main parties involved in Help to Buy have committed to keeping the scheme going until 2020.

Bellway opened a south west division to provide service in Bristol area. It’s the third outlet the company has opened since the recession. Another one is planned for 2015-16.

Sales prices are experiencing a slowdown in growth, especially in London where it averages 5% or less on new sites. Bellway is constructing homes on 27 sites across the capital, but most of them are in zone 2 or beyond, which protects them from the slowdown at the upper end of London’s property market.

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More recently, Mr Ayres hailed Scotland as one of its more important business areas after its average sale price increased by around 20% to an average of £190,000.

Bellway confirmed that approximately 600 of the 7,752 properties it completed in the year that ended July 31, were located in Scotland, with Glasgow and Edinburgh being especially active.

Mr Ayres said that Bellway experienced a 44% increase in its Scottish operation, bringing pre-tax profits to £354.2m. He expressed hope that the Scottish Government will reveal fresh support for its own version of Help to Buy next month, after the November spending review.

“That would be a welcome boost for Scotland because we have done incredibly well in boosting sales rates,” he said.

While Mr Ayre acknowledged that Help to Buy remains an “important selling tool” for Bellway, he said that the market needs to be able to prosper without its assistance by 2020.

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