Leading housebuilding company Redrow announced a £259.4million writedown on its land values yesterday and urged the Government to reinforce its efforts to help the property industry through the downturn.
Redrow's chairman Alan Bowkett welcomed the Government's recently announced measures, but said they were a mere drop in the ocean and more needed to be done to make first time buyer mortgages
more available and to free up mortgage lending in general.
The company has laid off 500 employees since the beginning of the year – nearly 40 per cent of its workforce in total – and yesterday announced that pre-tax profits for the year up the end of June had tumbled from £121million to £65.5million.
Therefore an exceptional £259.4million writedown on its land assets – the worst the industry has seen so far - pushed the company almost £194million in the red.
In the same period turnover fell by £185million to £650million, house sales were down by a fifth and net reservations were down by 55 per cent in the half year to June – as a result forward sales at the year end fell by 45 per cent.
In order to conserve cash Redrow will forego a payout of the final dividend for the time being, and attempt to further reduce salaries and bonus rewards.
Chairman Alan Bowkett commented: "It remains difficult to foresee how long the reduction in activity as a result of the credit squeeze will continue, but it is our view there may be no meaningful increase in the availability of finance in the wider mortgage
market before 2010.
"We believe that the government needs to urgently reappraise many of its policies in relation to the housing market given the change in market conditions," he added.
Housebuilder Barratt Developments, which has announced plans to cut more than 1,000 jobs, has also reported a slump in profits down to £137.3million – which represents a steep fall by 68 per cent from the year earlier. The company was also forced to write down £208.4million on its land following a fall in prices.
However, the company said in light of "the extremely challenging market" the results were satisfactory, and reported that the average selling price had risen by 6 per cent due to high-value sales in London.
"There is little prospect for any material improvement in trading conditions until mortgage finance and customer confidence return," chief executive Mark Clare predicted.
The average price of a house sold at an auction has equally plunged by nearly a quarter (23 per cent), according to calculations by the Liberal Democrat spokesman of the Treasury, Lord Oakeshott.
While in the same period a year ago the average house would have been sold at £170,300, the 3,993 homes sold at auction between June and August this year cost on average £130,400.
"Auctions are the sharp end of the housing market where real deals show the prices paid by real buyers," Lord Oakeshott said, "The published house price indices are well behind the game.
"Ministers must wake up now and let housing associations and councils buy empty homes for social housing to rent. The feeble government response to the housing crash has been like throwing pennies down the drain."
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