Turmoil in the financial markets is undermining confidence among Britain's house buyers, Bovis Homes has warned.
The warning came yesterday as the firm said it feared fall-out from the volatile situation would lead to lower sales and falling house prices.
The credit crisis, which led to the run on mortgage bank Northern Rock, saw Bovis suffer weaker-than-expected sales in its key autumn trading period.
Chief executive Malcolm Harris said that as a result, profit at the firm would be down a little compared with its previous outlook.
"We have had quite some turmoil in financial markets and people have become cautious," he said. What we need is the market to return to normality and people to get their confidence back."
Bovis, Britain's fifth largest housebuilder, joins a growing list of builders to warn that conditions in the housing market have tough-ened as stricter lending practices, and lower consumer confidence in the aftermath of the sub-prime crisis, have deterred homebuying.
Last week, Britain's biggest housebuilder, Taylor Wimpey, said it expected the UK market to remain subdued into next year, and that North America would remain extremely challenging.
On the same day, building society the Nationwide said most leading indicators of housing market activity were weakening despite a 1.1 per cent rise in prices in October.
Bovis said it now expected its total number of home sales in 2007 to be "marginally lower" than the 3,123 legally-completed sales a year earlier.
Meanwhile, it's average selling price is expected to be three per cent below the £187,000 achieved in 2006 - a fall of around £5,500. The company saw average prices rise 4.75 per cent in 2006.
Bovis said the price falls were a result of changes to its sales mix with fewer sales of more expensive homes. The Kent-based company added that its operating margin was in line with its half-year performance.
"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," the company said in a statement.
Bovis added that the integration of regional builder Elite Homes, which it bought for £25.7 million last month, was progressing well but said the deal was likely to cost £1 million more than initially expected at £3 million due to higher interest costs. It also said it was continuing to invest in strategic land and remained in a strong position to increase shareholder value.
Analysts saw the outlook from Bovis as a sign of further bad news to come for the sector.
"Bovis cannot be the only housebuilder to be feeling the pain and therefore we expect more statements like this to follow over the next few months," analysts at Panmure Gordon said in a note. Citigroup analyst Clyde Lewis said much of the bad news from Bovis had already been priced into the market. Bovis shares have almost halved in value after hitting 1204p in April.
Numis Securities cut its forecast for the firm's 2007 pre-tax profits from £140 million to £122 million. Bovis reported pre-tax profits of £132 million in 2006. Shares closed up 7p at 650p.