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Shares in housebuilders rose this morning ahead of the launch of a £1bn government plan to help homeowners. Gordon Brown is expected to unveil a package of measures today to revive the ailing housing market targeted at first-time buyers and vulnerable families.

Shares in Taylor Wimpey jumped 7.6%, up 4.25p at 60.25p in early trading. Barratt was up 5.5%, or 8.5p, at 164.5p while Persimmon climbed 3.9%, or 15p to 400.25p. Bovis Homes advanced 3.4%, or 15.5p, to 466.25p and Wolseley rose 7.5p to 468p, an increase of 1.6%, making it the second-biggest riser on the FTSE 100.

However, the FTSE 100 index was down 20.2 points at 5582.7 points, a fall of 0.36%. Energy groups and miners were among the big fallers. Shares in Tullow Oil fell 3.7%, or 29.5p, to 761.5p, the biggest faller on the FTSE 100, while Cairn Energy dropped 3.5%, or 97p, to £27.13.

Energy shares fell amid talk of profit-taking and as US crude dropped to $108.55 a barrel, its lowest level since mid-April, as worries receded over the impact of hurricane Gustav. "There's been a run up in the shares of late with strong earnings and now people are just cashing in," one trader told Reuters.

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Labels: Barratt Developments, Bovis Homes, Gordon Brown, House market, Housebuilders, Persimmon, property development, property prices, property trends, Taylor Wimpey, uk housing, Wolseley

Crest Nicholson, the house-builder taken private last year by HBOS and Scottish tycoon Sir Tom Hunter, has conceded that it could breach its banking covenants if the housing market continues to deteriorate.

In Crest's first set of accounts since de-listing from the stock exchange, which it filed last week, the company warned that its financial structure was highly leveraged.

'Financial forecasts, which take account of current market conditions, do not show any breaches of financial covenants,' Crest said.

'However, if the 2008 housing market proves to be significantly weaker than we expect, there is a risk that financial covenants will be breached. Contingency plans are in place to mitigate this risk.'

Although there has been speculation about the group's financial health, it is the first time it has formally stated there is a chance this could happen. The accounts also show the house-builder made a pre-tax loss of £10.1m in the 12 months to 31 October 2007. 'Finance expenses', including interest on loans, totalled £72.5m over the period.

But trading had remained strong last year, the company stated. Underlying pre-tax profits were £102.8m, up from £100m in 2006, and total housing completions rose by 11 per cent to 2,225. The average sale price was just under £198,000, down fractionally from the average of £199,000 recorded in 2006.

Article continues at Guardian Property

Labels: Crest Nicholson, Housebuilders, Housing market, HSBOS, property development, Sir Tom Hunter, Taylor Wimpey, uk housing

Kier Group, the construction, housebuilding and services group, reassured investors that it would meet full-year profit expectations this morning, despite the mounting woes afflicting the property market.

The company, which this month announced 350 job cuts in its residential division, said it continued to see "little evidence of a slowdown in the markets for construction and support services, both of which continue to perform strongly and have record order books".

The shares, which have fallen by almost 60 per cent over the past 12 months, rose by 35p to 945.5p, up almost 4 per cent.

Kier, which was involved in the construction of the Channel Tunnel rail link, said the mixed fortunes experienced by various parts of the company reinforced the benefit of having a range of businesses operating in different sectors of the market.

In a trading update covering the year to the end of the June, Kier said that the level of tender awards in construction had been "very high" and its strong order books reflected continued demand from both public and private sector clients.

It said the division continued to generate strong cashflows, contributing to a year-end net cash balance for the group of more than £140 million, not far short of the £148 miilion balance this time last year.

Article continues at Times Business Online

Labels: House market, Housebuilders, Housing market, Kier Group, property development, property prices

The Government is to benefit from the slump in the commercial property market, raking in £100m more than it expected from controversial changes to business rates.

The Government withdrew commercial property rate relief on empty buildings in April to encourage landlords not to leave buildings empty.

But rising vacancy levels in the sector mean landlords will have to pay millions of pounds more in rates on empty buildings than was forecast when the changes were introduced.

Figures from property agent NB Real Estate suggest that since the change in the law was first proposed, the number of vacant commercial buildings has jumped 15pc, resulting in a substantial increase in the rates payable on empty buildings.

Andrew Warde, director of rating at NB Real Estate, said: "This empty rates tax was conceived when the property market was performing strongly, but the downturn is heaping misery upon misery. The Government's belief that landlords keep buildings empty without good reason is just plain wrong and the blanket application of additional rates tax just doubles the pain."

Under the new legislation the 15pc increase in vacancy levels will result in landlords paying 15pc more business rates on their portfolio of empty buildings. For the Government this will result in a similar increase in its tax take on empty buildings. Original estimates ranged from £950m to £1.4bn.

Original article continues at Telegraph Business news

Labels: business rates change, commercial property rate relief, Housing market, NB real estate, property analysis, property development

There is now a very real chance that Taylor Wimpey, the UK's largest housebuilder by production, could become the first builder to fall victim to the credit crunch.

Created from a merger of Taylor Woodrow and Wimpey just a year ago, the company has stolen the dubious mantel of housebuilder most likely to collapse from Barratt Developments, after it revealed today that it had failed to secure between £400 million and £500 million of new funds from investors.

In theory, Taylor Wimpey has plenty of time to sort out its balance sheet, as it is not in danger of breaching covenants on its £1.7 billion debt until February. In the meantime, short-term cash flow is good and the company has taken tough measures to make sure it stays that way by closing a third of its offices and almost a fifth of its staff.

Full Story at Times Online

Labels: Barratt Developments, Housebuilders, property analysis, property development, Residential property, Taylor Wimpey

The scale of the problems facing the building industry was underlined yesterday when new figures showed British construction activity fell at its fastest rate in 11 years in June.

The Chartered Institute of Purchasing and Supply's construction PMI index fell for the fourth straight month to 38.8 from 43.9 in May - the weakest reading since the survey began in 1997. The housing sub-index was also the lowest ever, falling to 25.6 in June from 32.7. A score below 50 indicates a contraction.

"Housing bore the brunt of the credit crunch fallout, reflecting the steep decline in new housebuilding," said Roy Ayliffe of CIPS.

Housing minister Caroline Flint, who will publish a package of rescue measures this month, is trying to salvage the government's commitment to build 3m homes by 2020.

She said reforms would allow the Housing Corporation to pay 80% upfront to developers, rather than the current 50%, before work starts on housing projects. This would enable the corporation - a government agency overseeing social housing projects - to increase the pace of approvals and deliver much-needed affordable housing while supporting developers.

She said a national clearing house was being set up so housebuilders could approach the corporation with proposals to sell their unsold stock for affordable housing. The government has committed £200m for the purchase of unsold stock from housebuilders, which could then be used for social or affordable housing. The clearing house would give developers an indication of their chances of the social housing sector buying the unbuilt property.

She also said a further £270m from existing budgets would allow the corporation to provide an extra 3,800 homes for social rent and 1,500 shared ownership homes over the next three years.

Flint hopes the measures will prepare the industry for an upturn in a year or two year's time, as well as enabling councils to use their resources to keep the housebuilding programme going. The government's advisers - the National Housing and Planning Advice Unit - warned at its annual conference that even if house prices fell by 5% to 10%, there would still be an affordability crisis.

The government's targets for housebuilding have been fiercely criticised by regional assemblies for their lack of realism. For example, 49,700 new homes a year are proposed for the south-east compared with 28,900 planned.

But Flint said: "There is an overwhelming case for building more housing and we must remain as ambitious as possible. But ... we have to acknowledge not only the difficulties faced by individuals and families, but by housebuilders too."

A spokesperson for Shelter said: "This package gives the building industry a much needed kick-start."

Read more at Guardian Business

Labels: Housebuilders, property analysis, property development, property prices, Residential property, uk housing

A backbench Bill to let councils decide how much renewable energy developers should include in their schemes has won cross-party support when it was debated by the Lords for the first time today.

The Planning and Energy Bill cleared the Commons and gained an unopposed second reading after its introduction by Tory former minister Michael Fallon.

The legislation would allow councils in England and Wales to require a proportion of the energy used in developments come from renewable sources. They would also be able to set higher energy efficiency standards than current rules demand.

Tory Lord Hanningfield, who introduced the Bill, said it follows a pioneering initiative by the London Borough of Merton.

Merton requires at least 10 per cent of the energy needed for new housing developments to come from renewable or low carbon sources.

Lord Hanningfield told peers that the Bill was "permissive, localist and green" and "allows councils to act quickly without waiting years for other legislation to come into effect".

In the Commons ministers initially opposed the proposal, but later backed it after amendments were made to ensure councils did not take actions in conflict with national policies.

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Labels: Green housing, Planning and Energy Bill, property development

The stock market value of British housebuilders has plunged by £11.34 billion in just 12 months and is set to fall further after two investment banks warned today the housing market downturn will descend to levels last seen in the early 1990s.

Barratt Developments emerged as the sector's hardest hit company for the second day, after its share slumped by 26 per cent.

Barratt, which is now worth just £300 million but has debts of £1.7 billion after its acquistion of Wilson Bowden last year, is expected to seek emergency funding, possibly through a debt-for-equity swap.

Barratt is now worth less than a tenth of its peak stock market value.
Taylor Wimpey, the UK's third largest builder by volume and the result of the combination of Taylor Woodrow and George Wimpey, also plummeted by 20 per cent.

The losses compounded heavy share price falls yesterday, which wiped £400 million of the market value of the builders. Since last June, the housebuilding sector, then worth £15 billion, has seen its shares plunge by 76 per cent.

Shares in Persimmon, the last remaining housebuilder in the FTSE 100, were also down 9 per cent in early trading to 353p, their lowest point for five years. Persimmon faces ejection from the FTSE later today.

Berkeley Group shares also slid 9 per cent to 666p after Goldman Sachs reduced its recommendation on the UK housebuilder to "sell" from "neutral" and dramatically slashed its target price from 819.9p to 582.3p.

Analysts at Merrill Lynch said: "The early 1990s housing market has increasing relevance as a comparator."

They added: "There is growing evidence of consumers how behaving in a manner similar to that seen in the early 1990s, in that concerns over job security and falling house prices are leading to a reluctance to make a house purchase."

Merrill Lynch downgraded six housebuilders in the sector - cutting Barratt Developments, Bellway, Berkeley, Galliford Try and Redrow from "neutral" to "underperform", while Persimmon was moved to "neutral" from "buy", traders said.

There are fears that many housebuilders will be forced to make dramatic writedowns. In the early 1990s, housebuilders wrote down 30 per cent of their value - about £1.3 billion - and many of them needed more than one writedown before their net asset value stabilised.

The sector has been squeezed by banks tightening up on mortgage lending following the credit crunch, hitting the housing market. Many builders have put projects on hold, as willing buyers have dried up, and are laying off staff, while concerns are mounting in the City that many will have to ask shareholders for cash to strengthen their finances.

Housebuilders have also become a target for “short-sellers” who hope to profit from falling share prices. According toresearch from Data Explorers, which monitors short positions in the market, more than 23 per cent of Bovis shares are on loan with “short” investors, followed by 19 per cent for Persimmon and almost 18 per cent for Redrow.

Latest figures from the Royal Institution of Chartered Surveyors, out yesterday, said agents sold an average of just 17.4 properties each during the three months to the end of May, the lowest figure since it began collecting data in 1978.

Merrill Lynch has turned its focus on unemployment levels saying that they will be critical to determining consumer confidence and housing transaction levels, as was the case in the early 1990s recession. The broker suspects that rising unemployment will put additional pressure on housing transaction volumes.

It believes that there will be 10 per cent fewer house sales than last year and that prices will fall by 10 per cent.

"We believe we have gone beyond the tipping point and are now clearly seeing a UK housing market being squeezed on opposing fronts - by a lack both of willing lenders, as well as willing purchasers," the bank wrote.

It suggests that housebuilders are entering a prolonged period of underperformance, with a downturn likely to persist over the next three years.

"We are inclined to believe that if 1988-89 corresponds to 2007-08, than 1990-91 would correspond to 2009-10," Merrill Lynch said.

After the early 1990s recession, house prices did not start to recover until 1994.

Original Story from Times Business Online.

Labels: Barratt Developments, Berkeley Group, House market, Housebuilders, Merill Lynch, Persimmon, property development, RCIS, Redrow, Taylor Wimpey, uk housing, Wilson Bowden

Land and property developer switches focus to sites offering a mix of housing and commercial premises.

MacDonald Estates, the land and property developer, is predicting further growth this year despite tough market conditions after posting a profit of £5.1m for 2007.

The figure is an increase of 14.1% on the previous year and the ninth consecutive year of profit growth for Macdonald, started by entrepreneur Dan Macdonald in 1998.

But the Edinburgh-based company is planning to shift its long-term focus from purely commercial developments to building strategic new “mini-towns” including a 330-acre site it has identified in central Scotland. Other sites include Inverness and St Andrews.

Macdonald, chief executive of Macdonald Estates, said that by 2012, its focus will be almost exclusively fixed on community developments, with local power generation, sustainability and infrastructure as well as commercial premises.

“I am confident we will see the continuation of further profit growth through to 2009 as a number of our developments reach maturity,” he said.

The first site to be developed is a 260-acre site at Balloch Farm, Inverness, with a mix of housing and commercial. All the sites Macdonald has identified are in areas which are likely to be rezoned. Balloch is up for zoning in 2011.

“These new settlements are going to be the focus of the business and will allow us to use the expertise we have built in working with planners from the outset rather than just slapping an application in for consideration,” said Macdonald.

“Some will have gestation periods of 10-20 years although others might come through more quickly.

“These are not the eco-towns that Gordon Brown talked about but smaller mixed developments in areas where there is demand.”

Some of the other future developments for the company include a planned £100m hotel and office development at the SECC Glasgow and construction work on a £30m development at Falkirk Gateway, which starts later this year.

Macdonald also has plans to open an office in Dublin, furthering a commitment to business in the Irish republic. Plans are about to be submitted for a ¤40m (£31m) retail park at Portlaoise, an hour’s drive southwest of Dublin.

Macdonald appointed former Scottish Enterprise Fife chief executive Joe Noble as director of strategic development and infrastructure for the company last month.

Macdonald said: “I am in no doubt that we will see recessionary times and hear more accounts of bank write-offs, a further slide in capital values, greater inflation, raised debt, high bank charges, fire sales and a restrictive residential market.

“We should not delude ourselves. The Scottish market will be affected to a great extent.”

Original story here.

Labels: Dan Mcdonald, Macdonald estates, property analysis, property development, property prices, Scottish property market