Redrow sees drop in housing orders

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The Independent Online

Redrow underscored the sharp torments of the housing sector yesterday as it revealed dep-ressed forward sales and a dip in completions after last year's market turmoil.

The Flintshire-based property developer said that the housing market had become "significantly more challenging, reflecting the influence of higher interest rates and the impact of the credit squeeze on the availability of mortgage finance".

Redrow's forward sales for December fell by 9.4 per cent to 1,694, compared with 1,871 in 2006. Legal completions followed the trend, declining by 4.6 per cent to 2,111 in the last six months of the year just past, compared with 2,214 a year earlier.

The turmoil also ate into the developer's margins, which suffered by at least 1.5 per cent, and land sale profits for six months to December are expected to come in £5m lighter than the comparable period in 2006.

"It's been a challenging autumn period. The Northern Rock episode hurt consumer confidence and led to a tightening of lending criteria," said David Arnold, Redrow's group finance director. "Historically, our cancellation rate has been around 20 per cent. It went up to 26 per cent at the final part of last year."

Mr Arnold's comments echoed those made this week by Mike Farley, chief executive of Persimmon, another housebuilder caught in the consumer slowdown and credit market doldrums.

The housing sector had hoped for some reprieve from the Bank of England, which kept interest rates on hold yesterday. "From a broad, sector perspective a cut would have been helpful," said Mr Arnold. "But their decision was not entirely surprising."

The broker Dresdner Kleinwort, which has a "sell" recommendation for the company's stock, cuts its earning per share estimate for 2008 to 45.48p, from 54.58p previously, and to 44.80p for 2009, down 29 per cent from 63.55p previously.

Redrow's shares closed down 6p at 261p.