Housebuilding jobs slump in summer
LONDON, July 9 (Reuters) – Two of Britain’s biggest builders Bovis Homes and Redrow are cutting 40 percent of their workforces, 750 jobs in total, to cope with the deepening depression in the housing market.
The downturn has gathered pace and now feels “an awful lot worse” than the last major correction in the early 1990s, David Ritchie, chief executive of Bovis Homes Group Plc, said on Wednesday.
The comment came just before the Bank of England’s interest rate-setting committee began its monthly meeting and followed recent announcements of 3,000 job cuts at Barratt Developments Plc, Persimmon Plc and Taylor Wimpey Plc.
But there was some better news from Bovis which said it did not as yet expect any big writedowns of the value of its land holdings, although it will slash its dividend and cut 400 jobs at a cost of 2 million pounds ($4 million).
Housebuilders’ share prices have collapsed this year, partly on fears of big writedowns on land bought at the peak of the housing market. The mood worsened on June 30 when indebted Taylor Wimpey announced a 660 million pounds writedown.
Bovis shares, which peaked at 1,220 pence in April 2007, were down 1.4 percent at 313 pence at 0800 GMT.
Redrow, which is cutting 350 job at a cost of 3 million pounds, said it would significantly reduce the value of its land holdings and was reviewing its dividend policy.
Its shares, which had underperformed other housebuilders by 30 percent over the past fortnight, recovered 11 percent to 107 pence. The stock peaked at 737 pence in January 2007.
A 10-year boom in Britain’s housing market began slowing last summer before the global credit crunch choked off the supply of cheap and easy money that had helped triple prices in a decade.
Prices have fallen for several months as competition in the mortgage market all but disappeared and availability dried up.
Redrow Chief Executive Neil Fitzsimmons said consumers’ lack of confidence was now having a bigger impact on sales than their difficulties getting a mortgage, adding reservations in the six months to end-June were down 55 percent.
Fitzsimmons said that until Easter the lack of mortgages was the main factor hitting sales but since then the biggest issue was people’s general concern about the economy turning into fears for their own jobs.
Redrow sold 3,925 homes in the year to end-June, down 19 percent on 2006-07. The average selling price fell 2 percent to 157,000 pounds ($310,000).
Bovis’s completed sales fell a third to 851 houses at an average price down 4 percent to 196,500 pounds.
House price growth had been driven by demand — the government estimates the number of English households is outgrowing housing stock by 38,000 every year due to immigration and more people living alone. Analysts see this cushioning the fall in the longer term.
Landsbanki analyst Simon Brown said: “The current position is out of the control of Redrow and its peers and shows no sign of abatement.
“It will be interesting to see what Barratt have to say tomorrow (Thursday). One suspects a rather more effective sales effort will show its benefits even in this market,” he said.