LONDON (Reuters) - Turmoil in financial markets is undermining confidence among house buyers, Bovis Homes BVS.L said on Tuesday, as it warned that 2007 profits would be slightly lower than it had expected.
The housebuilder said both sales volumes and prices would be down in 2007 because consumers worried about the economic outlook have held back from buying property.
Profit at the firm would be down a little compared with Bovis’ previous outlook, Chief Executive Malcolm Harris told Reuters.
“We have heard quite some turmoil in financial markets,” Harris said, referring to the troubles at Northern Rock NRK.L and in the U.S. high-risk home loan market.
“People have become cautious,” he said. “What we need is the market to return to normality and people to get their confidence back.”
Bovis joins a growing list of builders to warn that conditions in the housing market have toughened as stricter lending practices, and lower consumer confidence in the aftermath of the subprime crisis, have deterred home buying.
Last week, Britain’s biggest housebuilder, Taylor Wimpey (TW.L), said it expected the market to remain subdued into next year, and that North America would remain extremely challenging.
On the same day, building society the Nationwide said most leading indicators of housing market activity were weakening despite a 1.1 percent rise in prices in October.
The average sales price for a Bovis property is likely to be around 3 percent lower in 2007 than it was last year, while sales volumes are expected to be marginally down year-on-year, Bovis said in a trading statement.
Analysts saw the outlook from Bovis as a sign of further bad news to come for the sector.
“Bovis cannot be the only housebuilder to be feeling the pain and therefore we expect more statements like this to follow over the next few months,” analysts at Panmure Gordon said in a note.
Bovis shares opened down 2.4 percent at 627.5 pence before recovering losses by 8:53 a.m.
The stock has underperformed the FTSE Household Goods index .FTAS3720 by 32 percent this year.
The median forecast for Bovis among 11 analysts polled by Reuters Estimates was for pretax profit of 139.6 million pounds before exceptional items.