UK Builders Watch Helplessly As A Crumbling Market Eats Away At Its Foundations

The UK house building market is in danger of its foundations collapsing beneath the weight of falling home rates, high repossessions and lower mortgage sanctions. With no guarantee of assured sales, once the homes have been constructed, house builders who have taken huge loans to finish off their pending projects are perched on a precarious financial ledge where unsold houses coul

d just be the push they do not need for them to end up in a financial rubble. There are some builders who are contemplating selling off excess land in their possession to inject some cash into their sale-starved business. Some firms like Barratt has a high debt of 1.7 billion pounds after taking over Wilson Bowden for 2.2 billion pounds in the previous year.

Many analysts are questioning the decision of Barratt to take over another firm, which incidentally happened just before the mortgage crisis shook the UK. Barratt, however, denies that it might fall foul of its lender banks and is instead concentrating on reducing costs and purchasing fewer plots in a measure to ride out the crisis. So since many UK house builders have now decided to go in for fewer projects in a bid to survive in the market, the completion rate of all new flats is getting slower even though the government has unsuccessfully tried to prop it up.

Even major builders such as Taylor Wimpey have been facing a rough long patch after it had to go in for a 283 million pound write down, after its properties in the US had been re-valued to a lower value. So, even as its Spanish venture is facing rough weather, it has started offering its UK customers a complete home shifting package, which includes up to 1000 pounds in legal costs, stamp duties, and even packing and moving services.

Mr. Peter Redfern, the chief executive of Taylor Wimpey said that they could be scaling down the construction of new homes by around 15% as compared to the previous year but also added that he was satisfied with the company’s results and also reiterated that the stock market too had reacted favorably in his company’s efforts to get the most out its land reserves by reflecting in the higher prices of its shares. But the firm’s market value has gone down to 1.77 billion pounds from a high of 4.32 billion pounds, which it had attained after merging with George Wimpey.

Mr. Redfern is however optimistic about the future and maintained that they were borrowing within their limits. He expected house prices to remain stable, but there would be some pressure to offer incentives to buyers and added that there would be a serious problem only in the case of higher unemployment in the UK but he did not feel that there were many predictions in that direction. Even firms such as Crest Nicholson were finding it difficult to sell new homes and were also saddled with huge debt, but experts opine that due to its strong base, it would ride out the current storm without deep bruises.

There have been some layoffs in this sector and the current year too could see a further downturn but experts are pointing out that the demand is still present and are hoping that buyers get over their fear of falling rates and actually start buying houses rather than just looking at them. With funds expected from private equity to help out the builders in the current year and if the market picks up in the next year then British builders have a good chance of scraping through the current crisis.