Bovis Homes has sounded a warning to the UK house-building sector after reporting a collapse in customer orders for new houses on the back of rising interest rates.
Shares in the housebuilder crashed to a year's low, falling 10.8 per cent to 820.5p as a result of the disappointing figures. The mid-sized housebuilder's cautious outlook underlined the impression that the housing market is suffering after five interest rate rises in less than a year.
Recent surveys by Nationwide and Halifax have suggested that the previously ebullient UK housing boom was slowing despite positive trading figures from some of the country's largest housebuilders such as Taylor Woodrow.
Bovis said that reservations for new homes had increased by only nine houses to 2,282 in the first six months of the year.
Meanwhile, average selling prices increased a measly £300 per house to £189,000 during the period, well below the rate of inflation. The company completed 1,256 homes over the period, six fewer than at the same stage last year.
Bovis said: "While the group is in a good position to expand, the extent of the planned increase in volume for 2007 over that achieved in 2006 will depend on consumer confidence over the key summer and autumn selling period."
The rate of the slowdown came as a shock to investors, with the company reporting a 9 per cent growth in reservations in early May, compared with the 0.4 per cent growth it achieved in the first half of the year. One market maker said: "Investors are still very nervous over property stocks. Some are calling the top of the commercial property market which would have a knock-on effect throughout the industry."
Barratt Developments, another mid-sized housebuilder, will provide more insight into the market when it issues a trading update later this week.
Chris Millington, an analyst with Bridgewell Securities, said the Bovis update proved slightly disappointing "which does not bode well for the 10 per cent growth in pre-tax profit forecast for both 2007 and 2008".
However, other analysts argued that Bovis has a strong strategic land bank and is well funded, making it a good candidate for further consolidation within the sector.