Bovis is latest housebuilder to report slowdown
After Persimmon and Redrow, Bovis revealed scars from last year's market turmoil yesterday.
Forward sales at the Kent-based housebuilder fell to 816 by the end of December 2007, down 19 per cent against the comparable figure for 2006. Legal completions also suffered, falling by more than 6 per cent from 3,123 homes in 2006 to 2,930 homes last year, as the company struggled with a slowdown in activity.
Bovis said that the outlook for 2008 remained uninspiring. "Looking ahead, a number of external market metrics suggest that activity in the UK housing market has slowed: both in terms of the lower rate of house price growth, and in terms of the reduced number of mortgages being issued," it said.
The chief executive, Malcolm Harris, blamed the credit crunch, noting its affect on mortgage availability and impact on potential customers, adding that "the short-term position has a degree of uncertainty".
"Given the changes that were actually over quite a short period of time, what we have seen is consumer caution coming into the marketplace," he said.
Mr Harris added that while the number of cancellations in the last quarter was above the norm, they were caused by customers uncertain about their lending position. Customers who had secured their lending beforehand tended to continue with their purchase.
"Basically the current position regarding the availability of credit is keeping the market subdued," he said, "What we need is for the [Bank of England's] base rate to come down and for lenders to make more credit available to customers. You must remember that the UK has some of the highest interest rates in the world, and with the economy slowing down there should be room for the Bank to make cuts to stimulate activity."
Its rivals Persimmon, which experienced a 14 per cent slump in forward sales last year, and Redrow, which saw its figures for the period fall by 9.4 per cent, made similar complaints about the lack of mortgage availability earlier in the week.
"The trading statement referred to the short-term market outlook being 'unclear' – in our view, the unclearness is between very bad and very, very bad for volume builders," said Alistair Stewart, an analyst at Dresdner Kleinwort. "Results for 2007 should be 'broadly in line' but only after two downgrades," he added. "We expect fairly universal downgrades across the sector in the months ahead." Mr Stewart has cut his 2008 and 2009 pre-tax profit estimates by 29 per cent and 34 per cent respectively.
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