Alerts by building giants add to misery

Housebuilding giants Redrow and Galliford Try today heaped further gloom on the property market as they warned of dramatic falls in sales in recent weeks.

The alerts came as sterling tumbled amid yet more bad news from property surveyors, who said house prices were falling across the country. The pound fell 1.19 cents against the dollar to 1.9501 and 0.53 cents against the euro to 79.53p.

Redrow chief executive Neil Fitzsimmons said trading conditions were now even worse than he forecast in late February because mortgage lending has all but dried up.

Rival Galliford Try said conditions "have been difficult throughout the spring selling season" as both firms echoed recent warnings from other builders including Persimmon, Taylor Wimpey and Bovis Homes.

Redrow said cancellation rates are on the rise with a "marked increase" since Easter when they were running at "just over 20%". Reservations so far this year are down about 50%, leading Fitzsimmons to predict that legal completions for the year will be 10% lower than earlier estimates.

"The market conditions we are experiencing are largely being driven by mortgage availability," he said. "It is difficult to assess how long the sharp reduction in sales activity will persist or the extent to which house prices will be affected.

"Our expectation that 2008 will represent a more difficult trading environment than experienced for many years has materialised. Both sales activity and net selling prices have come under increased pressure due to the prevailing market conditions, and in particular the severe restriction in the availability of mortgage finance.

"As a result, the trading environment has deteriorated to an even greater extent than we had anticipated in February."

Redrow shares tumbled 123/4p to 280p. Despite the lack of a spring bounce in sales, Galliford Try forecast profits for the year to end-June to be no less than £60 million, against £60.2 million last year. Chief executive Greg Fitzgerald said: "In recent weeks, they have shown further sharp deterioration as the availability of mortgage finance for homebuyers has reduced, with increased costs together with a requirement for more substantial deposits.

"Ongoing negative press speculation on the future of the housing market has also served to make potential purchasers reluctant to commit themselves."

Galliford shares fell 21/2p to 551/2p.

THE STORY SO FAR
27 February - Barratt Developments says that house sales are down 7%

17 April - Taylor Wimpey says sales "significantly below" 2007

24 April - Persimmon reports that sales are down by 24%

6 May - Bovis Homes says reservations for new homes are down by 30%

13 May - Redrow says its reservations are 50% lower than at this time last year

13 May - Galliford Try reports there has been no spring bounce