Bovis highlights fragile housing market

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The Independent Online

Government austerity measures have left Britain's housing market in a "fragile" state as spending cuts and tax hikes hit consumer confidence, housebuilder Bovis Homes said today.

Interim results from the Kent-based builder showed stable conditions and steady price growth in the first half of 2010, but Bovis said there had been a shift in the market since the election and June 22 emergency Budget.

The group gave a cautious outlook for house sales and prices over the months ahead, although its interim results revealed a marked improvement on a year earlier when the recession had left it with losses of £8.6 million.

Bovis returned to profit with a £3.5 million surplus for the six months to June 30, with the number of private home sales up by 3%.

It said sale prices rose by around 3% on an underlying basis year-on-year.

Bovis said ongoing restrictions on mortgage availability continued to dampen the new homes market, particularly for first time buyers.

It added: "In the last few weeks of the half year, after the general election and the Budget, the market became more fragile.

"The group, therefore, remains cautious in its expectations of transaction volumes and sales prices in the short term given the low levels of consumer confidence at this time and the ongoing challenges in the mortgage market."

The firm's cautious tone follows a recent spate of bad news on the property recovery.

According to Nationwide, the average price of a UK property dropped 0.5% to £169,347 between June and July, while the Royal Institution of Chartered Surveyors' survey of property professionals also registered its first fall in prices for a year last month.

However, Bovis is taking steps to reduce its reliance on a housing market recovery by snapping up land with residential planning consent at a low point in the cycle.

Improvements in its financial position have also allowed it to make plans to resume dividend payments to shareholders after an absence of more than two years.

The firm said last month it intended to restart payouts at the end of the financial year, having put its dividend on hold at the start of 2009 to focus on shoring up its balance sheet in the midst of the house market slump.

David Ritchie, chief executive of Bovis, said: "The group has performed well in the first half of 2010, delivering a solid set of trading results during a period when the housing market has remained challenging."

Bovis added 1,874 consented plots to its so-called land bank in the first half, boosting its number of consented plots to 13,113.

It has also agreed terms on around another 3,000 plots, which are likely to be bought by the end of 2010.

Today's results showed the average sales price of a private house rose to £163,500 in the half-year, up from £160,400 a year earlier.

Bovis completed sales of 803 homes against 754 a year ago.