Share prices across the housing sector fell sharply this week as housebuilders sounded the first serious notes of caution over interest rate hikes.
Worst hit was Bovis Homes, which said in a trading statement on Monday that it had experienced a slowdown in reservations, and that the extent of the planned increase in volume this year would depend on consumer confidence over the summer and autumn.
Bovis said it had secured 2,282 reservations for the year, nine ahead of its equivalent position in 2006. Its share price dropped 11% to 820.5p after the announcement, despite Bovis’ insistence that its interim profit would be in line with group expectations.
Barratt, which on Wednesday issued its first trading update since its acquisition of Wilson Bowden, also warned about the market. Its said: “It would be prudent to assume that the cumulative effect of interest rate rises will cause the housing market to tighten.” However, the company said its forward sales were up 15% from June 2006, to £1.4bn.
One City analyst predicted that a number of housebuilders would issue similar statements after last week’s interest rate rise to 5.75%.