What's going on?
British homebuilder Bellway has little reason to complain – its stock rose by 3% on Tuesday following solid annual results. But the UK’s fair economic weather may not last…
What does this mean?
Bellway sold more than 10,000 new homes last year, with the average price of each unit 9% higher than a year ago. Bellway’s strategy of avoiding building and selling in London, where falling house prices have dragged the UK’s average lower of late, paid off – helping to grow its annual profit 14% beyond last year’s total. But the builder’s 2019 currently rests on uncertain foundations – Bellway said a shortage of workers and materials like timber and bricks could push its prices higher and profit lower. And don’t mention the B-word…
Why should I care?
For markets: Not so fast, home buyer.
Wages of UK workers grew by over 3% in August – the fastest rate in almost a decade and, crucially, faster than the rate at which the prices of goods and services increased (a.k.a. inflation). A little extra cash in consumers’ pockets at the end of the month could encourage would-be homebuyers to take the plunge. But Bellway isn’t banking on it. It’s worried that Brexit (okay, we said it) in March 2019 could dent consumer confidence, which would likely have a large impact on Bellway’s year: spring is typically the busiest time for home sales.
The bigger picture: British buyers brought home the fresh mortgage bacon.
In August, first-time buyers were out in force applying for – and getting – mortgages. So much so that they offset the decline in approvals of other potential borrowers (e.g. people who already own a house but want to move). British buyers possibly made haste after the Bank of England raised interest rates in August, hoping to secure a cheaper mortgage while they still could.