The housing crisis is taking its toll on housebuilders as a result of a fall in mortgage availability. Leading UK companies, Redrow and Barratt Developments have released gloomy Interim Management Statements with Redrow resorting to cuts in its workforce.
As the housing market prepares itself for further trouble, the housebuilding sector is already experiencing serious strife. So much so that, according to The Daily Telegraph, Redrow has already laid off 15 per cent of its workforce, around 200 staff.
In its latest trading update, Redrow stated: "Our expectation that 2008 will represent a more difficult trading environment than experienced for many years has materialised. Both sales activity and net selling prices have come under increased pressure due to the prevailing market conditions and in particular the severe restriction in the availability of mortgage finance
Since January, all 100 per cent LTV mortgage
deals have been pulled, fees are commonplace and availability is scarce. In addition, house prices fell for the first time year-on-year last month, and, thanks to housing minister Caroline Flint's blunder on May 13, it seems the Government are expecting house prices to fall by at least five per cent, if not 10 per cent by the end of 2008.
Redrow is not alone as it suffers at the hands of the credit crisis, UK-based Barratt Developments has also revealed losses although, as yet, its workforce has remained unscathed.
Despite an encouraging start to the year, Barratt has been forced to recognise the deteriorating market and its consequences; it stated that: "Since the end of March, market conditions have deteriorated significantly as a result of an unprecedented reduction in mortgage availability and tightening lending criteria, combined with a decline in consumer confidence."
As a result, group chief executive, Mark Clare, in an attempt to boost morale, said: "We do not expect to see a meaningful upturn in the housing market until there are improvements in the availability of mortgage finance. We do, however, continue to believe the medium-term outlook remains strong given the restricted supply of housing in the UK."
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