HOUSEBUILDER Bellway today warned the property market is likely to be subdued this spring although sales rises this year have boosted the firm’s confidence.

The Newcastle-based company sold 2,247 homes in the six months to January 31, compared to 2,014 in the same period a year earlier.

But average prices were down slightly to £156,000 as margins slid to around 6%, from 9.2% last year after exceptional items.

Bellway said it had sold or reserved 92% of its annual target in the first half of its financial year, adding activity in the next six weeks would determine whether this benchmark would be increased.

"Historically there is always an uplift in weekly home reservations as the traditional spring selling season unfolds," Bellway said.

"However, with mortgage providers continuing to require a high level of deposit, particularly for first time buyers, we expect trading conditions during the first half of 2010 to be subdued relative to historic levels."

Recent signs on the property market suggest house selling is picking up, but levels still remain well below the highs seen before the slump.

House prices rose for the seventh month in a row during January but the rate at which they are increasing slowed, according to recent figures from the Halifax.

The average cost of a UK home climbed by 0.6% during the month to £169,777, but the increase was the lowest in the past six months, reinforcing previous evidence that the recent strong recovery may be running out of steam.

Bellway said its order book at the end of the half-year was £390 million, from £296 million in 2009, in a sign of sturdier trading ahead.

This represents 2,506 homes, of which 706 are for the following financial year.

The firm has upped its growth potential as the pressure on the housing market has eased.

It has been helped by a significant reduction in its stock of unsold properties compared to last year and is now investing in both work in progress and new land.

Bellway said it has spent around £76 million on land, mainly in the south, and has terms agreed on a further £123 million.

It said as it wins new planning permissions it is gradually opening new sites, with sales outlets predicted to grow to around 190 by the end of the financial year, from 175 in the first six months.

Chris Millington, of Numis Securities, said the update showed that the group is well positioned for 2010.

He said the news that Bellway had sold a majority of its target at this early stage of the year "suggests that the group is likely to outperform against previous volume guidance which could boost profits considerably versus estimates".

Analysts from Panmure Gordon said they would upgrade their forecasts "noting that Bellway is one of just a couple of housebuilders that has remained profitable throughout the slowdown".