Housebuilders warn on profits

Tue May 13, 2008 7:59am BST
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LONDON (Reuters) - Two builders warned investors on Tuesday their performance has been hit by a sharp downturn in the housing sector this spring.

Galliford Try (GFRD.L: Quote, Profile, Research) said its full-year profit would be at least 60 million pounds, below the 76.6 million pounds pencilled in by analysts, according to Reuters Estimates.

"Markets for the group's housebuilding division have been difficult throughout the spring selling season. In recent weeks they have shown a further sharp deterioration as the availability of mortgage finance for homebuyers has reduced," the company said in a statement.

Separately, Redrow (RDW.L: Quote, Profile, Research) said that until recently, cancellation rates had been running at just over 20 percent but "we have experienced a marked increase since Easter. It is becoming increasingly difficult to predict accurately reservation and cancellation rates".

Their warnings came as a survey showed on Tuesday that house prices fell in every region of Britain in April with surveyors reporting the widest margin of decline in at least 30 years, indicating the housing market downturn is gathering momentum.

The Royal Institution of Chartered Surveyors said its house price balance fell to -95.1 in the three months to April from -79.4 in March -- the weakest since the series began in January 1978 and well below forecasts for a reading of -80.0.

The builders' warnings are the latest in a series led by Persimmon (PSN.L: Quote, Profile, Research), Britain's biggest housebuilder by market value and No.3 by homes built, which said on April 24 its sales so far in 2008 were down 24 percent.

The timing given by Persimmon and now Galliford Try and Redrow ties in with a report in early April from Halifax, Britain's biggest mortgage lender, that house prices fell 2.5 percent in March, as mortgage availability dried up. Prices also fell in April.

Britain's housing market, which enjoyed a boom stretching back to the mid-1990s that saw many valuations more than triple, had been slowing before the global credit crisis began last summer, and housebuilders' share prices have slumped.

Price growth has been driven by demand; the government estimates the number of households in England is outgrowing housing stock by 38,000 every year due to immigration and more people living alone, and analysts see that demand cushioning any fall.

 
 
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