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UBS warns housebuilders

Thursday, 5 June 2008 7:36 AM

The future looks bleak for UK housebuilders after some £300 million was wiped from the value of the six leading providers yesterday.

Following an ominous report from investors UBS, share prices of the six biggest housebuilders in the UK fell sharply.

UBS also cut price targets for Barratt Developments, Persimmon and Taylor Wimpey.

The investment bank also made similar cuts for dividend expectations for Barratt, Redrow and Taylor Wimpey.

"The speed of the collapse in April and May has been astonishing," said Mark Stockdale, UBS's lead housing analyst.

"This is as bad as 1991 - without a doubt. And the big difference is that I have never seen a housing market fall as fast as in the last eight weeks."

New research released today by Halifax finds house prices fell 2.4 per cent in May - with average prices down 3.8 per cent year-on-year.

This is in addition to findings from the Nationwide house price index, showing prices are now falling at the fastest rate for 17 years.

In response to the gathering gloom, the House Builders Federation (HBF) has called on the Bank of England to take action - claiming a cut in interest rates is now "imperative".

"Previous economic crises have led to housing market slumps, but this time the cart is leading the horse, with the speed and depth of the downturn threatening a serious wider economic crisis," said John Stewart, HBF director of economic affairs.

These calls have been echoed by property website SmartNewHomes.com, with the organisations director, David Bexton, saying: "The Bank of England needs to cut interest rates further, lenders need to start passing rate cuts onto consumers and the government needs to take some practical steps to get the market moving once again.

"It simply cannot ignore that 28.3 per cent of young working households can't afford to buy their own home."

Earlier this week a report from market analysts Hometrack found nearly a third of first-time buyers are unable to secure a property in their local area.

Chris O'Toole

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