Burnham’s Your First Home scheme ‘could boost Bellway’s house output by 10%’

The new Your First Home programme for first-time buyers could increase the number of houses British builder Bellway produces each year by 10%, its boss has said.

Faced with a chronic shortage of homes, the government has made housing one of its top priorities and Andy Burnham’s surprise announcement of the YFH scheme a fortnight ago sent housebuilders’ shares soaring by more than 10%.

Jason Honeyman, who has led Bellway since 2017, welcomed the new programme, which will be more targeted than previous help-to-buy initiatives. It features household income caps to exclude those with big salaries, and price caps to ensure people can only buy modest houses.

Full details, including the launch date, are expected be announced by John Healey in his first budget as chancellor on 28 October.

YFH applies only to England and is for prospective first-time buyers hoping to buy a new-build flat or house. They will be offered a government-backed equity loan worth 20% of the purchase price and the minimum deposit the buyer will have to put down will be just 2.5%.

While the scheme has the potential to “provide significant support for first-time buyers” it could weigh on the market in the near term, said Honeyman, as some will want to wait for the initiative to be launched.

However, he added that it could drive Bellway’s annual completions back to 10,000 homes, in the 12-month period from next September at the earliest.

“Based upon our past experience with help to buy, the new scheme has the potential to boost volumes by around 10%, and with a market recovery, provide a path back to at least 10,000 homes a year and a return on equity of 15%,” Honeyman said.

Bellway is targeting between 9,000 and 9,400 homes in the current year, down from 9,695 last year, given a lower order book and “ongoing pressures on customer demand” coupled with higher construction costs, running at between 3% and 4%.

It has a forward order book of 4,981 homes worth £1.4bn, compared with 5,285 homes with a value of £1.5bn a year earlier. Bellway also expects the average selling price to be flat over the coming year at about £325,000.

The chief executive’s comments came after the company beat analysts’ expectations with revenue of £3.16bn for the year to 31 August, up 13% from the previous year. This lifted underlying profits before tax by 5.7% to £305.7m.

Bellway shares rose 2% on Tuesday, but are still down by more than a quarter so far this year.

YFH is expected to give a shot in the arm to most big housebuilders, such as Persimmon, MJ Gleeson, Taylor Wimpey and Bellway.

However, the upmarket builder Berkeley Group, which is focused on London where prices are higher, and Vistry Group, which has pivoted towards building affordable and social homes, are not expected to get much help from the initiative.