Bellway is likely to have run up a large bill for professional advisory fees in its £720 million takeover pursuit of fellow housebuilder Crest Nicholson, which it scrapped abruptly without explanation on Tuesday night.

But it could well have calculated that this sunk cost will pale into insignificance compared with the gains it may now make given conditions appear to be improving in the housebuilding sector. Especially now that the company will move forward unencumbered by what may have been a protracted and complicated integration process, had the deal gone through.

Bellway chiefs may also be breathing a sigh of relief at their decision to not make a firm offer for Crest given the volatility of the global economy, which only last week saw huge sell-offs in major international stock markets amid concerns over the outlook in the US, only for markets to quickly regain those losses. Indeed, Middle East firm Sidara cited “rising geopolitical risks and financial market uncertainty” as it called a halt to its long-running takeover interest in Wood Group, the Aberdeen-based engineering services giant.

READ MORE: Magnet project raises hopes for troubled Sauchiehall Street

Newcastle-based Bellway, which has homes for sale in numerous developments across west and central Scotland, made its first approach for Crest Nicholson in April. After two approaches were rebuffed, Crest's board signalled that it was minded to accept the terms of a third all-share proposal from Bellway in July, and until Tuesday the mood music suggested that a deal was very much on.

Given the way Crest’s shares were lifted by the prospect of a takeover by Bellway, and indeed plummeted after the bid interest ended, it seemed the City was in favour of the tie-up. It looked to be a further example of consolidation in the sector in response to the challenges posed by higher interest rates and rising costs, following Barratt’s £2.5 billion proposed acquisition of Redrow announced in February. That deal now looks set to proceed following an initial investigation by the competition watchdog.

Now the Bellway-Crest tie-up is off, leaving investors wondering if a line has been drawn under takeover interest in Crest generally, or whether Avant Homes may yet return to the table, having earlier seen its own approach rebuffed.

While Bellway did not give an explanation for its decision to walk away on Tuesday – the company emphasised in its statement the confidence it retains in its “robust balance sheet and operational strength, combined with the depth and quality of its land bank" - the backdrop in the UK housebuilding sector has certainly shifted since it first approached Crest in the spring.

READ MORE: Scott Wright: Rise and fall of a popular Scottish business

For one, conditions for home buyers appear to be gradually improving, amid evidence of mortgages becoming slightly more affordable.

The Bank announced on August 1 that its Monetary Policy Committee had voted to reduce the bank rate by a quarter point to 5% in the first cut since March 2020, handing a much-needed boost to homebuyers and businesses perhaps looking to borrow to invest.

That decision instantly sparked debate over whether this would be the first in a series of cuts, though following yesterday’s news that annual UK consumer prices index inflation had increased to 2.2% in July, from 2% in June, it may be wrong to assume rates will fall much further between now and the end of the year.

Regardless, Bellway emphasised its view that conditions were improving in the housebuilding sector when it updated the market on trading for the year ended July 31 last week. It highlighted a better outlook for mortgage costs and welcomed planning reforms in England pledged by the Labour Government to streamline the process and stimulate activity in the housebuilding sector.

“While a lower starting forward book drove a reduction in volume output, customer demand during the year has benefited from a moderation in mortgage rates which has helped to ease affordability constraints and supported an increase in reservations,” said Bellway chief executive Jason Honeyman.

READ MORE: 'Katie is perfect fit to lead Aird Hotels into a new era'

“The improving trading backdrop, combined with the strength of our outlet opening programme, has generated healthy growth in the year-end order book. As a result, we are in a strong position to return to growth in financial year 2025, as previously guided.

“We are encouraged by the new Government’s plans to increase the supply of new homes across the country and welcome its plans to reform the planning system. Overall, the long-term housing market fundamentals are positive, and we remain confident that our robust balance sheet and operational strength, combined with the depth and quality of our land bank, will enable Bellway to successfully capitalise on growth opportunities.”

And Bellway is not alone in expressing confidence in the housebuilding sector. Persimmon, one of the UK’s largest housebuilders, lifted its forecasts for the year last week amid improving consumer confidence and summer optimism, following the announcement of Labour’s planning reforms. It pointed to “improved sales rates and robust average selling prices, despite ongoing affordability challenges”.

“Strengthening consumer sentiment, improving macro-economic conditions and the Government’s welcome and ambitious planning reforms that demand more of the high-quality, affordable homes that are Persimmon’s core strength are all supportive of our ambition to grow this year and in the future,” said chief executive Dean Finch.

READ MORE: Shares in BT surge after Gleneagles owner buys 24.5% stake

Of course, while sentiment appears to be improving among the big housebuilders, the UK as a whole continues to face an acute housing shortage. Numerous local authority areas in Scotland have declared housing emergencies, as debate rages over what needs to be done to address the crisis.

A big part of that debate surrounds the rental market, where rents are soaring amid a lack of supply. New proposals for rent controls in the Housing (Scotland) Bill are proving to be controversial and have sparked the inception of a new group of industry leaders from the private rental sector. The group has raised the prospect of legal challenges to the proposals, amid concern the legislation could constrain the supply of homes and turn investors away.

“The main issue with the Scottish Government's assessment is that it identifies reducing supply as a risk but provides no concrete proposals for mitigating this risk,” said the new body, More Homes More Quickly, in a letter to Scottish housing minister Paul McLennan.

Other stakeholders, including Shelter Scotland and tenants' union Living Rent, have said rent controls have the potential to work and provide protection for tenants.

“There’s a lot of detail missing in the Bill, but if implemented properly rent controls have the potential to offer tenants protections and improve affordability across the sector,” said Alison Watson, director of Shelter Scotland, in an exclusive report in The Herald.

“It’s important that as that detail is filled in the voices of those currently living in the private sector and struggling with costs are heard loud and clear by politicians.

“But you can’t legislate the housing emergency away. A broken and biased housing system can only be finally fixed with systemic solutions.”