Housebuilders warn of tough conditions

In a further sign that the housing market is cooling, the homebuilders George Wimpey and Gleeson have warned of "challenging" market conditions.

In a further sign that the housing market is cooling, the homebuilders George Wimpey and Gleeson have warned of "challenging" market conditions.

Wimpey, Britain's biggest homebuilder, said yesterday: "As in previous markets with little or no price inflation, customers are taking longer over their purchase decisions and so any recovery in reservations since the summer has been limited." The company said slower trading in the UK will have a "modest" impact on sales volumes, but it still expects to meet analysts' expectations for full-year profit. The consensus forecast is £440m in pre-tax profit, compared with £378m last year.

Dresdner Kleinwort Wasserstein cut its rating on Wimpey to "sell" from "hold," citing concern about the general housing outlook. Alastair Stewart at Dresdner said that with first-time buyers unable to afford high house prices, the market has been propped up by buy-to-let investors. "If they disappear or start selling into a weakening market, volumes will be hit," he said.

House-price surveys and mortgage approval numbers indicate that the housing market is coming off the boil after the Bank of England hiked interest rates five times since November.

Gleeson, a South London-based builder, reported that footfall had halved over the past three months and that the average selling price had fallen to £186,000 from £195,000 last year. Andrew Muncey, the managing director, said the company is "cautious" about the prospects for house building, not just in the traditionally quieter autumn-winter period but also during the crucial spring season.

Analysts said Gleeson was far more downbeat in a presentation to them yesterday. While the builder's pre-tax profit almost doubled to £17.6m in the year ended June 30, this is unlikely to be repeated. Dermot Gleeson, the executive chairman, said, "The recent slowdown in the housing market may well preclude a further significant uplift in profits in the current year." One analyst commented, "People aren't buying houses. It's all looking pretty gloomy." He added that he expects to see more downbeat statements from builders in the next few months as they attempt "to dribble bad news into the market".

Wimpey shares closed down 9.75p at 378.25p while Gleeson's stock fell 7.5p to 209p.