House reservations slide by 15%

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Two of the UK's leading housebuilders yesterday brought further gloom to the already depressed housing market, reporting flat or falling selling prices and a slump in reservations.

Beazer Homes, now the second-biggest builder, said that reservations had dropped 15 per cent since mid-May. The market's decline continued into June and July, said chief executive Dennis Webb. Although the market had come back in August and September, he warned that they would not recover all the fall this year and, as a result, volumes and profitability would undoubtedly be hit in the current financial year.

Meanwhile, Tarmac said that underlying prices had fallen 2 per cent in the first six months of 1995 as demand weakened. The chief executive, Neville Simms, said that they expected pressure on selling prices and margins to continue.

The uncertain prospects prompted Tarmac to put its housing arm up for sale earlier this year and Mr Simms said they had received a number of approaches from both financial and trade groups for the business. They expected to get some hard offers once a detailed sales prospectus was issued in a few weeks' time.

Despite their bearishness about the immediate outlook, both companies remain optimistic about the long-term prospects. Mr Webb said that low mortgage rates, rising salaries, static house prices and the public's preference for home ownership amounted to sound fundamentals for the industry.

Beazer disclosed profits of pounds 55.7m in its first full year results since floating off from Hanson. Reflecting a changed year end, the figures compared with pounds 33.9m in the previous nine months. A final dividend of 3.9p made a total of 5.85p (5.4p). Completions hit a new record of 6,679, boosted by last year's addition of John Mowlem Homes last year. The pounds 31.1m acquisition cost, a pounds 71.9m land bank investment and work in progress halved net cash to pounds 48.5m at the end of June. The shares ended unchanged at 145p, well below last year's 165p offer price.