Bovis issues profit warning as crunch bites

Housebuilder Bovis has issued a profit warning as the credit crunch firmly bites into the UK property market.

The firm's board now expects the results for the first half of the year to be "significantly lower than it had previously anticipated".

Completions from Bovis will also be below the level estimated in March.

So far this year reservations recorded by Bovis have fallen 30 per cent to 1,382. Cancellation rates have also seen a high rise in the first quarter of 2008.

The firm's falling fortunes are being put firmly upon the credit crunch.

A statement from the board read: "Conditions in the housing market have deteriorated sharply. Well publicised negative developments in the mortgage market have continued apace, with a large number of mortgage products being withdrawn, mortgage interest rates and fees being increased and more substantial deposits being required by a range of different lenders.

"This, together with a general reduction in the quantum of mortgage finance availability, has contributed to a much reduced volume of mortgages being approved, such that the British Bankers Association has reported a 46 per cent decline in the number of mortgage approvals for house purchases in March 2008 compared to March 2007.

"Combined with ongoing adverse press speculation about the housing market, this is making homebuyers markedly more cautious."

However, Bovis said it was well placed to deliver sustained good medium and long-term performance.

"The underlying shortage of houses in the UK, as evidenced by the government’s ambition to deliver three million new homes by 2020, will underpin housing market activity in the future," the Bovis board stated.

James Rowlands, public policy officer at the Royal Institution of Chartered Surveyors (Rics), said: "Further bad news from housebuilders shows the impact the credit crunch is having on people who want to buy homes but are no longer able to get a mortgage.

"It is good news that Bovis will continue to develop new housing based on local market conditions but this may not be enough to maintain current total housebuilding levels.

"As we see the impact of current housing market conditions on the activity of housebuilders the government's target of building 240,000 new homes each year is slipping even further out of reach."

Daniel Barnes