House builder records major losses

The UK housing market took another hit yesterday with builder Bovis, a major player in the market, reporting a fall in profits by 83 percent and the number of new houses reserved by buyers in the private market reduced by more than 50%.

The credit crunch has hit the market hard and shows no signs of abating if the new figures are representative.
    

Dividends slashed

Bovis responded to the fall in profits by cutting dividends from 17.5p to 5p, and went on to say that the current market trend of reduced sales volumes looks likely to stay set for the rest of this year.

Bovis says it had 795 properties reserved for private homeowners on June 30th this year, a figure that compares poorly with that of the same date in 2007 when the company had 1,621 houses outlined for occupation. The situation has remained stable this summer with sales down half on the previous year.

The reservation figure can not be taken as the final indicator as not every reserved home is translated into an eventual sale, but the statistic is considered the best guide to purchase levels by private buyers. In contrast to the figures for private homes, social housing demand – that required by housing associations and councils – rose from 661 to 687 on the previous year.
    

Sales down by half

Turnover of £149.3 million was generated by Bovis in the first half of 2008, a figure arrived at through the sale of 624 houses, 43 percent lower than the corresponding period for 2007.

The company, like many in the housing market, has taken the step of reducing staff number, in the case of Bovis by a drastic 40 percent, in order to save expenditure. The projection is that this will save £10 million in overheads, one fifth of the company total.
    

Office closures

Bovis has also taken the step of closing an office that serviced the eastern region and has cut subcontractors substantially in further cost cutting measures.

Bovis recorded a debt of £93 million and adds that that figure is due to increase to as much as £120 million by the close of the year.  

The sales value of the average home is down over the year, too, with the 2008 price of £196,700 comparing to the 2007 figure of £204,500. The reduction represents a loss of 4 percent over the year. Bovis reports that the majority of houses sold this year are smaller than in 2007, a further reflection on the reduction in purchasing power of the population under the current credit crisis, and as a result the sale price in square foot terms registered an increase of 2 percent over 2007.