Tuesday, Nov 20, 2007
How long before desperate housebuilders will be forced to start slashing prices?
times online: Barratt chief calls for cut in interest rates to stem falling sales
Shares in Barratt fell yesterday to a four-year low, down 5 per cent to 480p, part of a wider sell-off in both housebuilding and commercial property stocks as fears intensified that both property markets were heading for a repeat of the 1990s recession.
Posted by sold out @ 05:39 AM (934 views) Add Comment
13 Comments
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1. Quoth said...
I work in the construction industry (not housing) and for us cashflow is king. I can't imagine it being much different for house builders particularly when you consider the scale of their developments across the country.
I think for now they're having a bleat that they can't milk the market like they have done for so long. The seven lean years are approaching fast and they are going to have to cut their prices!
Q
2. the reaper said...
Not long now.Next to my current pad-,they've built twenty 3 storey semi detached houses adn by the looks of it are going slow time in order for noone to notice they've only sold one. For the same money you can buy detached place with a big yard and bedrooms that don't feel as if they're an afterthought to the 'oh so numerous' en suites..Wouldn't touch the shares with someone else's barge pole.
3. yorkshireman said...
Barratt's in common with a lot of people are out of touch with reality. Cuts in interest rates will not stem falling sales, so why do they imagine that it will ? Cutting prices by a substantial amount, say 30-40% may make a difference, but who wishes to be the first to break ranks. Not Mark Clare I suspect. Sooner or later, one of the housebuilders will be forced to either break ranks or go under, then the whole thing will collapse like a pack of cards.
4. Orwell said...
A spec builder I speak to a tthe leisure club I visit, said that in the 1990's the lenders came out of the woodwork all over the place... Cnada, Mexico all different banks. So they were cutting and dicing even then ...
5. C'mon Correction said...
When are people/companies going to learn that you can't have it all, all the time? We've had almost 10 years of growth in our economy, this in itself has mostly been artifical growth built by debt. Basically it has been future growth brought forward.
The economy can't afford to just cut rates just to stop an over-bloated sector from falling; no-one who has benefitted from the property boom has thought to act prudently and apply some brakes to the gravy train - they've just whooped and cheered it on. It's come to it's end - property will go through hard-times for the next 10+ years, they have to accept it and stop whinging.
6. drewster said...
Housebuilders are something of a canary in the coalmine. While private sellers can simply withdraw from the market if their house doesn't fetch what they think it's worth, Barratts and the others have to keep selling at a more-or-less constant rate. In the current climate it's difficult to keep up the volume of sales without extra incentives or dropping prices.
7. ontheotherhand said...
Unfortunately whilst the miners could see the canary drop dead, we do not know what discounts are being forced on Barratts and the like by buy to let companies because these numbers do not appear on the Land Registry. In the artilce it says, "It is understood that these sorts of buyers are asking for discounts of 15 per cent or more off the asking price." Now we would hope to see that come through from the many property price trackers, but none of Halifax or Nationwide (no mortgages), Rightmove (no estate agents involved) nor Land Registry includes these discounts in their average figures.
8. planning4acrash said...
Barratts know full well that interest rates won't help, but it will help them to blame the government!!
9. maddison said...
There is a new build house in kingston vale.. http://dexs.webdadi.biz/details.dtx?propertyid=5B619E5D-D826-438A-8703-CB2D628A137A that has been on the market for over a year. It has been reduced from 1.3m to 1.2m about 6 months ago still not sold. I am watching this one with interest..... When this one finally drops below £1m the correction will be truly here.
10. sold out said...
Poor old Barretts, Its so sad i feel like crying (with laughter).
The fact is that barratts and all the rest of these parasite building companies have had it really good for the last 10 years.They have collectively restricted the supply of housebuilding with their hoarding of landbanks whilst at the same time steadily increased the price of their "houses".I note this article claims they have added 2% since July this year.
They have created the biggest property bubble in history and its about to go "bang".
These companies are not going to hold out forever and will just have to reduce their prices,just to stay afloat.The suggestion that a load of BTL companies will come along and buy up their stock at a discount is in my opinion just not going to happen.As the property meltdown picks up pace over the next few months, there will be more and more unsold newbuilds and Barrets and the rest will i am sure be desparately trying to shift them.Once this starts i believe it will be the building companies that will lead the market down to rock bottom.
11. shipbuilder said...
Houses are still the made out of the same raw materials as they were 10 years ago, these companies have huge land banks bought years ago, so it can't be costing them that much more to build a house. In other words, they are crying because they won't make as much profit as in the last few years. They may cut a few jobs, but won't go under.
This is a prime example of why boom and bust can never be banished with our economic system - during the boom, profit expectations are raised year on year, requiring huge growth, debt, etc.etc. which is always ultimately unsustainable. As soon as that growth can't be maintained, shares tumble and heads roll.
They're still going to make a profit, though, so what's the problem? Constantly having to live up to the market's expectations. Why do we continue with a system that has failed us so many times?
12. Garyb said...
I don't remember Barretts asking the Government to put interest rates up when they were selling every house they could build and forcing up prices to FTBs. What goes around...
13. Dad Badger said...
Shipbuilder. Don't ask rhetorical questions when you know damn well why we carry on as if nothing could change. It's called greed, vested interest and inherited title. All it takes is for enough people to stand up and call for change at the right time. And that time is coming. It's obvious how gullible and self-serving the majority of people are. We need to convince your average Joe / Joanne that a fundamental change the way property is distributed and taxed would benefit society as a whole, not just those with pre-existing capital to invest. Let's hope it hits hard. If it's just another 'adjustment' we'll learn precisely nothing.