'Building on hold' in property sector

The UK property sector could see a severe downturn in the number of new homes coming onto the market as a result of the credit crunch.

That is the view the managing director of the Wrigglesworth public relations consultancy, who has predicted more building firms will announce a downturn in business after developers Persimmon warned of a fall in revenue.

Speaking on BBC Radio 4's 'Today' programme, John Wrigglesworth said: "There are lots of other builders that have put building on hold; they have just not announced it yet.

"The fact there is no mortgage funding means there are no mortgages and even though people want to buy houses they can't, because they can’t get the mortgages to purchase them."

The news follows an announcement earlier today from Persimmon – the UK's biggest housebuilder by market value and third by homes built – said revenues had fallen 24 percent year on year to 1.37 billion pounds.

"Over the last three weeks the unprecedented tightening in the mortgage market has caused a further deterioration of the housing market leading to lower sales volumes and increased cancellation rates," Persimmon explained in a trading statement.

"At the same time the backdrop of extensively reported concerns about the global credit crisis have continued to undermine consumer confidence."

The news could prove detrimental to ambitious government house building programmes.

Gordon Brown pledged to build two million new homes by 2016 upon coming to power last year, with a further one million carbon-neutral properties by 2020.

This now seems increasingly unlikely.

"I think we will see further announcements in the building industry of this form," continued Mr Wrigglesworth.

"Sites that have been started will be completed; that is what Persimmon are saying but the thing is, land banks are not going to be developed.

This view is supported by the Royal Institution of Chartered Surveyors.

"This really makes any government housing targets for the next few years totally unlikely."

"Even before the current market problems, housebuilding rates were well below the government’s highly aspirational target of 240,000 new homes each year," said James Rowlands, public policy at Rics.

"This warning from the stock market shows there is an immediate problem and house building levels will fall further from where the government is aiming to be.

"In the current climate these targets are looking more and more unrealistic."

Chris O'Toole