HOUSEBUILDERS UNDER PRESSURE
The largest housebuilder, Persimmon, said housing market conditions had deteriorated rapidly over the past few weeks and warned revenues this year would fall by a quarter.
The gloomy update sparked a sell-off in other housing related stocks. Barratt Developments fell more than 13 percent to a six-year low, Taylor Wimpey was off nearly 10 percent to an eight-year low and Bovis Homes slid nearly 6 percent to a four-year low.
"Over the last three weeks the unprecedented tightening in the mortgage market has caused a further deterioration of the housing market, leading to lower sales volumes and increased cancellation rates," Persimmon warned.
House prices have been falling on a monthly basis since the end of last year as the credit squeeze has exacerbated affordability pressures after a decade-long boom.
The downturn appears to be gathering pace. Halifax, the biggest mortgage lender, said house prices fell last month at their fastest pace since 1992 when the country was in the grip of recession.
The Bank of England unveiled an ambitious plan this week to swap banks' hard-to-trade mortgage assets for government securities in a bid to cushion the economy from the global credit squeeze.
It has also cut interest rates three times since December. Its scope to deliver further rate cuts, however, is being limited by rising price pressures.
The CBI survey showed manufacturers were putting up prices at the fastest rate in 13 years, attempting to counteract the effect on their margins of the sharpest rise in input costs since 1990.
With consumers finding it harder to borrow and global commodity price inflation pushing up the prices of household essentials, retailers questioned the official sales data. "These figures paint an overly rosy picture," said Stephen Robertson, Director General at the British Retail Consortium. "It is taking deep and widespread price-cutting to tempt customers to buy anything other than non-essentials."
