The UK’s major housebuilders took another stockmarket hammering as fears over the property market sent shareholders rushing for the exit.
Investment bank Merrill Lynch downgraded six housebuilders, hitting stocks. The fresh warning followed concerns issued by Goldman Sachs and Dresdner Kleinwort analysts earlier this week.
Barratt Developments was the biggest casualty, falling 26 per cent. Shares have fallen by more than half since trading began on Monday morning.
Taylor Wimpey was down 21 per cent and nursing losses of 38 per cent so far this week. Charles Church builder Persimmon - which is set to be relegated from the FTSE 100 Index - shed nine per cent and has lost more than 20 per cent since Monday.
On Tuesday, the Royal Institution of Chartered Surveyors (RICS) said the number of homes changing hands had fallen to a record low, shaking confidence in the housebuilding sector.
But Merrill Lynch’s note to clients warned that higher unemployment levels would put even more pressure on housing transactions as consumer confidence evaporated.
Official figures showed the fourth consecutive monthly rise in unemployment claimant count.
Barratt and Taylor Wimpey were joined among the fallers by other housebuilders including Bellway, Bovis Homes and Redrow.
The value of the FTSE 350 household goods index - which includes all the major listed housebuilders - has fallen about 40 per cent in the past year. Barratt, burdened by about £1.7 billion in debts from its acquisition of rival Wilson Bowden last year, has now fallen to less than a tenth of its stock market peak.
The sector has been squeezed by banks tightening up on mortgage lending following the credit crunch, hitting the housing market.
Many builders have put projects on hold and are laying off staff, while concerns are mounting in the City that some will have to ask shareholders for cash to strengthen their finances.
Housebuilders have also become a target for “short-sellers” who hope to profit from falling share prices. According to research from Data Explorers, which monitors short positions in the market, more than 23 per cent of Bovis shares are on loan with “short” investors, followed by 19 per cent for Persimmon.
RICS said agents sold an average of just 17.4 properties each during the three months to the end of May, the lowest figure since it began collecting data in 1978.
