The slump in Britain's housing market - the worst in more than 15 years - will have a massive impact on the broader UK economy, and could cost up to 100,000 jobs, according to an industry body.
The slump in Britain's housing market - the worst in more than 15 years - will have a massive impact on the broader UK economy, and could cost up to 100,000 jobs, according to an industry body.
"The housebuilding industry has a huge multiplier effect on employment and the wider economy," Roger Humber, strategic policy adviser to the House Builders Association, a division of the National Federation of Builders, said yesterday. "If major housebuilders con-tinue to cut around 40% of their workforce there will be further losses amongst those employed by thousands of smaller housebuilders," he said.
"Many more thousands of self-employed tradesmen and sub-contractors, building materials producers, manufacturers of white goods, carpets, curtains, DIY, estate agents, and solicitors will be affected."
Research by Cambridge Econometrics during the last housing recession put total job losses in the region of 100,000 on the basis that 100,000 fewer houses were built a year, or one house per worker per year. "We are heading in the same direction again," Humber warned.
Major stockmarket-listed housebuilders have announced around 5000 job cuts in the past fortnight to cope with the deepening depression in the housing market. Some, like Bovis Homes Group are cutting 40% of their workforce. Barratt has also cut jobs and has merged two offices in Scotland and others in England, while Tulloch Homes in Inverness has announced plans to eliminate 40 jobs.
Bovis chief executive David Ritchie said the downturn has gathered pace in the past few weeks and now feels "an awful lot worse" than the last major correction in the early 1990s.
City economists and housing industry analysts have expressed concern in recent days over housebuilder balance sheets and banking arrangements, given they are dependent in part on land values, which have been hit by falling property prices. Barratt reported write-downs of £115m across its landbank, but the figure is only a slice of the £550m write-down from rival Taylor Wimpey. Taylor also stunned the market after failing to agree a financing package with investors worth a reported £500m.
Housebuilding analyst Rachael Waring, of Panmure Gordon, said recent updates had been a "mixed bag". "Barratt has removed a lot of the uncertainty on its finances and that has been positive for the share price, but on the other hand Taylor Wimpey's update was far worse than expected - they've shown the two ends of the spectrum," she said.
Some of the more specialised property developers have seen trade remain fairly robust. Berkeley Group, for example, posted a 3.2% increase in annual profits for the year to April 30 and said forward orders were up by nearly £100m.
The firm benefits from its focus on London and south-east England - areas that have been less affected by the property slowdown. It is also positioning itself as an "urban regenerator" to distance itself from the so-called volume building market, led by firms like Taylor Wimpey and Persimmon.
Private sales are down by more than half for many of the big builders, despite efforts to spur buyers with "buy now, pay 25% later" deals and big price reductions.
Ritchie said the issue for many purchasers is not just the lack of available mortgage finance, but the fear of negative equity. Buyers do not want to buy before the market has bottomed-out, he warned.
"Even if liquidity came back to the mortgage market tomorrow, it would take some time to persuade consumers to buy a property in the current market," he added.
Meanwhile, shares in Taylor Wimpey, the UK's second- worst performing homebuilder this year, rose nearly 20% at one stage yesterday on a report in Building magazine it may sell a third of the company to a US private equity investor.
Taylor Wimpey climbed 2.75p to 37.75p.
