UK's Bellway raises home building forecast after strong spring

By Anandita Mehrotra

(Reuters) -British homebuilder Bellway raised its forecast on Tuesday for the number of homes it expects to build this financial year to 8,600-8,700, from 8,500 previously, supported by stronger spring sales and improved customer demand. 

Its shares rose about 5% as the company said it was sold out for the year to July 31, and that it expects to build 20% more homes across this fiscal year and next. 

Home sales in Britain picked up recently ahead of the April 1 expiry of temporary tax incentives for affordable and first-time buyers, supported by gradual interest rate cuts.

Data on Tuesday showed UK pay growth slowed and unemployment rose to a four-year high in the three months to April, possibly easing the way for more rate cuts.

"Ultimately, lower rates in the UK should lead to lower mortgage rates and better affordability in the housing market, a key factor in the ultimate recovery in the sector," said Colin Sheridan, an analyst at Davy.

Shares of rival homebuilders Persimmon, Barratt Redrow, Taylor Wimpey and Berkeley Group were up between 1.8 and 4%.

Government efforts to boost housing supply, including a 2 billion-pound pledge for 18,000 affordable homes, have raised optimism in the sector, though builders are worried about the impact of a building safety levy, now delayed until late 2026.

Bellway constructs everything from one-bedroom apartments to six-bedroom family homes and luxury penthouses.

The company said it now expects an average selling price of around 315,000 pounds ($425,502) this financial year, up from a previous forecast of 310,000 pounds, as the final quarter will include a higher proportion of private completions. 

Its forward order book, a indicator of near-term demand, was up 7.7% year-on-year to 5,759 homes, as of June 1.

In contrast, Bellway's bigger rival Persimmon last month said it was cautious about how economic uncertainty could affect affordability and demand. 

($1 = 0.7403 pounds)

(Reporting by Anandita Mehrotra in Bengaluru. Editing by Sherry Jacob-Phillips and Mark Potter)