Home builders' shares continue to slide

Thursday, 01, May 2008 02:25

Housebuilders in the UK have seen shares rapidly decrease in value as property prices have begun to fall.

According to the Nationwide house price survey year-on-year prices fell for the first time last month - with a one per cent fall recorded.

This appears to have had a negative impact on the share values of some of the biggest name in the industry.

Barratt Developments - which acquired Wilson Bowden for circa £2.2 billion April 2007 - has seen shares fall dramatically over the last year.

While shares in the company were worth 1,200p each in May 2007, they have now fallen to just 265p.

Barratt Developments was at the centre of speculation that it would have to tap investors for cash to help reduce its £1.73 billion of debt during February.

The same is true of York-based homebuilder Persimmon, which has seen shares worth 1450p each at this point last year tumble in value to just 567p today.

Last week Persimmon announced it was suspending all new property developments, after recording a profits dip of 24 per cent amid the credit crunch.

"As the credit crunch takes its toll on mortgage lenders and first time buyers, house builders are also feeling the effects following concerns that we could see the worst downturn since the housing slump of the early 1990s," commented Angus Rigby, chief executive officer of execution-only brokers TD Waterhouse.

The country's largest housebuilder by volume, Taylor Wimpey has also seen shares in the company fall by more than ten per cent in the last week, driven by the less-than-confident statement about cautious trading in 2008.

However, as prices have fallen, so investors have begun to take note.

"The appearance of both stocks in this week's top ten buys indicates our customers are confident that at these reduced prices, house builders could still turn the corner and offer some good value over the longer term," concluded Mr Rigby.