Autumn chill from Bovis on house sales

One of Britain's biggest home builders today sent a shiver through the housing market with a profits warning in the wake of the credit crunch and crisis at Northern Rock.

Bovis Homes became the latest industry player to warn that business stalled in the "key" autumn selling period due to a lack of confidence among potential buyers and sellers.

Chief executive Malcolm Harris said the average selling price for new homes will be about 3% lower this year than last year. He also expects the number of homes sold to be "marginally" lower than last year.

His warning followed a raft of surveys, official data and forecasts in recent weeks suggesting the housing market is heading for a sharp slowdown.

Harris blamed the collapse of the subprime mortgage market in America and subsequent freezing of the credit markets which led to the run on Northern Rock, the first on a British bank for 140 years.

"Recent events in the financial markets have adversely affected consumer confidence, resulting in sales being lower than anticipated during the key autumn selling period," he said.

"At the half-year we said the outlook would depend on the autumn and during that period we have had Northern Rock and the confidence hit from the subprime market woes generally.

"Overall volumes are off a little. Therefore profits are going to be down a little on the outlook for this year.

"The group's current outlook for legal completions in 2007 is that volume, including the contribution from its recent acquisition Elite Homes, will be marginally below that achieved last year."

Last year Bovis sold 3123 homes at an average price of £184,000 andmade profits of £132 million. Increases in UK interest rates have also made mortgages more expensive, but Bovis believes that the outlook for the housing market is strong.

"Looking ahead, the mid- and longer-term supply and demand dynamic remains very attractive in the housing market, but, in the short term, sales will reflect this recent decline in consumer confidence, in particular as it relates to major consumer purchases," said Harris.

Bovis shares fell 3p to 640p.