Redrow and Bovis Homes piled further misery on the housebuilding industry yesterday, cutting 850 jobs, reviewing their dividend policies and warning that the property market was in its worst state in living memory.
Redrow said it had no choice but to cut 450 jobs, while Bovis is making 400 staff redundant. The lay-offs are about 40 per cent of each company's workforce. Bovis is also slashing its interim dividend to 5p, down from 20p last year, while Redrow has placed its divided policy under review.
The job cuts take the number shed by construction companies – among them Barratt, Taylor Wimpey and Persimmon – to more than 5,000 in the past week.
The announcements from Bovis and Redrow came alongside dismal trading updates. Both reported falling sales during the first half of the year, with lower prices for those homes they did manage to sell, and warned that the market was still slowing. Bovis's sales were 32 per cent lower than in the first six months of 2007, and its average sale price fell from £187,600 to £167,500. Redrow's sales over the year to the end of June were down almost 19 per cent, with its average price sliding from £159,900 to £157,000.
Like other housebuilders, the speed and scale of the collapse in the sector in just three months has taken Bovis and Redrow by surprise. Neil Fitzsimmons, Redrow's chief executive, said: "The market for both new and second-hand homes has declined rapidly to transaction levels not experienced for very many years."
Nor does either company have any confidence that the housing market is close to righting itself, with little sign that the squeeze on mortgage availability that has hit demand for housing will loosen in the near future.
The Bovis chief executive, David Ritchie, warned: "Given the speed of emerging trends in the market at present, it is difficult to estimate with any certainty the likely net pricing of the group over the second half of 2008. It is very tough to predict how long this will last."
Both companies are facing a worsening trading position. Redrow, which has opened negotiations with lenders over the refinancing of its debts, said reservations were down by 55 per cent, while Bovis said it would review whether writedowns of its assets were necessary. Property analysts warned investors to expect further grim news from housebuilders over the next few weeks, beginning with today's trading update from Barratt Developments, one of the worst-hit companies in the sector.
William Jones, an analyst at Royal Bank of Scotland, said: "A severe volume and price correction now looks inevitable for the UK housebuilders, with land values likely to adjust down sharply and the pace of cash generation restricted."
The City welcomed news of the staff cuts. Bovis shares rose by 5.5p – or 1.7 per cent – to 323p, while shares in Redrow gained 3.9 per cent to close at 100p.Reuse content