Bovis Homes echoed recent profit warnings from house builders yesterday as it released its Interim Management Statement warning of significant falls in profit.
The announcement comes in the wake of similar statements from Bovis Homes' competitors, Persimmon and Taylor Wimpey which have also been forced to face up to the deteriorating housing market and its affect on new builds.
According to the statement, the fall in Bovis Homes' sales is a direct result of the rapidly deteriorating UK housing market. It stated that "negative developments in the mortgage
market have continued apace, with a large number of mortgage products being withdrawn, mortgage interest rates and fees being increased and more substantial deposits being required by a range of different lenders."
Consequently, mortgage approvals have decreased by 46 per cent and this has, according to Bovis Homes, made potential homebuyers more cautious and reluctant to buy as house prices fall but mortgage criteria tightens.
Bovis has been forced to reduce its house prices inline with other UK house prices which, according to the Halifax House Price Index, fell by 1.3 per cent last month and are widely predicted to fall by around 10 per cent by the end of 2008.
Despite attempts to keep the statement positive by announcing its intentions to continue developing new houses, albeit with caution, the facts speak volumes. In addition to reduced mortgage deals
and falling house prices, Bovis Homes has also had to contend with increased cancellation rates, which in turn contributes to its fall in predicted profit.
One glimmer of hope for developers like Bovis Homes is the Government's recognition of an underlying shortage of houses in the UK, highlighted by its ambition to deliver three million new homes by 2020. With this in mind, Bovis Homes ended its statement confident that the housing market will have to recover at some point to deal with this shortage.
Commenting on Bovis Homes' profit warning, public policy officer at the Royal Institute of Chartered Surveyors, James Rowlands, said: "Further bad news for house builders shows the impact the credit crunch is having on people who want to buy homes but are no longer able to get a mortgage. As we see the impact of current housing market conditions on the activity of house builders the Government's target of building 240,000 new homes each year is slipping even further out of reach."