Bellway’s profits plummeted after the homebuilder agreed to a hefty fee for building safety enhancements.

Despite reaching record revenues as a result of growing private home completions, the FTSE 250 company said on Tuesday that profits fell 38 percent year-over-year to £242.6 million in the fiscal year ending in July.

It incurred £346,2 million for fire cleanup procedures on buildings above 11 meters in height developed during the past three decades, compared to just £51.8 million the previous year.

In April, the Newcastle-based company joined other large housing developers in signing the Building Safety Pledge established by the UK Government in response to the Grenfell Tower catastrophe.

Bellway’s underlying pre-tax profit increased by 22.5 percent to £650.4 million as a result of the ongoing pandemic-driven demand for new houses in the United Kingdom.

The company’s overall housing completions outperformed projections, increasing by 10.5% to a record 11,200 units, with the increase in newly-built private residences greatly exceeding the decline in demand for social housing.

As a result of record-low borrowing rates and a temporary stamp duty holiday, average selling prices also jumped by 2.6% to £314,400 in the UK property market.

However, the association anticipates that average sale prices would decrease to roughly £300,000 this fiscal year since a bigger proportion of sales will involve social housing.

In the first two weeks of October, first-time buyer demand was approximately one-fifth weaker than in the same period last year, according to data released yesterday by the property website Rightmove.

In recent weeks, mortgage rates have also increased as a result of former Chancellor Kwasi Kwarteng’s heavily criticized mini-budget, which featured £45 billion in unfunded tax cuts.

Despite the reversal of the majority of these measures, swap rates – a popular statistic used to price mortgage products – remain elevated, and lenders have developed more expensive deals for customers.

Since December 2021, when they were only 0.1%, the Bank of England has hiked interest rates seven times in a row to combat inflation. It is expected that the Bank of England will raise rates once more shortly.

AJ Bell’s investment director, Russ Mould, deemed this prognosis ‘ambitious’ even though Bellway executives predicted output would be comparable to the previous year.

Even if this is achieved, he continued, margins are likely to deteriorate as rising input prices are no longer hidden by the continuous home price rise.

“Bellway and other homebuilders have already seen a terrible year in terms of share price, so the question is how much of this is already factored in. As long as mortgage rates continue to rise, the industry may remain unfashionable.

Tuesday’s closing price of £17.86 for Bellway shares, a decrease of 2.2%, indicates that their value has decreased by approximately 46% over the past 12 months.