Housebuilders’ woes increase as sales plummet

| July 9, 2008 | 0 Comments
Housebuilders' woes increase as sales plummet

Yesterday’s announcement that housebuilder Persimmon has cut around 2,000 jobs since the start of the year has been followed by further gloomy news from Bovis Homes and Redrow, which are also reducing staff numbers.

The firms expect to cut 400 and 550 jobs respectively, blaming the losses on the credit crisis and high mortgage costs.

According to Bovis, the market for selling homes is the worst that the group has seen for years with completions for the six months to the end of June down 32%.

Persimmon saw a 31% fall in completed house sales during the same period with the average selling price at £181,500, compared with £189,225 a year ago.

The group’s private sales fell by 45% in the first six months of the year, while social housing completions rose 27%.

UK housing developers are now mothballing some new projects and Persimmon says it will only proceeding with new developments cautiously.

According to Persimmon’s chief executive, Mike Farley, previous slumps in the UK housing market have not coincided with a shortage of mortgage funds, having been prompted by events in the wider economy or by house prices rising beyond the means of purchasers.

The impact of the credit crisis has seen a rapid decline in borrowers’ prospects, with banks and building societies demanding larger deposits and worthy credit histories while at the same time raising interest rates.

Persimmon expects to complete 11,000 homes in 2008, down from 16,000 in 2007. The current downturn in the housebuilding sector will have a significant impact on the Government’s targets to bolster the UK’s inadequate housing stock.

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