Housebuilders Take A Beating
Housebuilders are struggling in the current property market, and their share prices are falling. They will be building less and Gordon Brown’s target for new homes will probably not be met. Housebuilders will have to re-think their strategies.
House builders in the UK are taking a stock market beating this week as house building activity is falling at its fastest rate since 1995.
This lack of building activity will come as a blow to Gordon Brown who has pledged to build three million new homes in the UK by 2020.
The Royal Institute of Chartered Surveyors says that the credit crunch is affecting housebuilders badly, especially private housebuilders. Here, projects are being put on hold or scrapped completely.
All regions are being affected, but Northern Ireland and Wales are feeling the pinch most, and currently the North of England is suffering the least heavy cuts.
Housebuilders shares took a battering on the stock market where Persimmon fell 24½p to 291½p, and Taylor Wimpey dropped 2p at 60p. Barratt (down 1¼p at 56¾p) got off lightly as it appeared to be close to securing rescue financing with its lenders.
Following the news from RICS and the housebuilders, Nationwide announced its latest house price news, which was that house prices dell for the eight month in a row; they were down by 0.9% in June.
With housebuilders struggling, and the mortgage market in difficulty, it is going to take some time before things loosen up. The market will eventually return to ‘normality’ but it won’t happen soon and it won’t happen overnight. Lenders are unlikely to relish a return to the ultra-competitive days of a couple of years ago, and lending criteria are likely to remain much stricter than they used to be. Indeed, normality will not be what it once was, with deposits higher and mortgages costing more. A return to rising house prices is expected to take anything from a year to 18 months.
Builders will have to re-think their strategies. The building of huge numbers of inner-city flats has not worked for them and many remain unsold in cities like Nottingham. Cities undergoing regeneration, like Leeds, have fared better, but where areas are dependent on the buy-to-let market there is every likelihood that many properties will remain available for some time to come.
