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By Gabor Debreczeni
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- The shares of U.K. house builders fell Monday following a report that the companies are preparing for large write-downs on the value of recent purchases of land.
The hardest hit was Barratt Developments PLC (LSE:BDEV) (BDEV.LN). At 1412 GMT, Barratt traded down 18 pence, or 13.1%, at 122 pence while the London benchmark FTSE 100 index traded flat. Bellway PLC (LSE:BWY) (BWY.LN) and Quintain Estates & Development PLC (LSE:QED) ( QED.LD) were two other big losers on the day. Bellway (LSE:BWY) was down 44 pence, or 7.5% , at 545 pence while Quintain Estates was down 31 pence, or 9.2%, at 307 pence.
The price of land is considerably more volatile than the price of housing and has fallen through the floor in many parts of England outside of London. While the house builders still will likely turn a profit on older properties, they will not turn a profit on recently purchased plots, requiring a write-down. The threat of write-downs is the latest in a series of blows for house builders that have included tightening credit markets, decreasing house prices, falling construction activity, skyrocketing supplies prices, and a UBS report that saw declining housing demand "a severe problem for profits in both 2008 and 2009."
Since the end of last year, shares of Barratt Developments (LSE:BDEV) have dropped 70%. Shares of Taylor Wimpey PLC (LSE:TW) (TW-GB) have fallen 58% Persimmon PLC (LSE:PSN) (PSN-GB) by 43% , and shares of Bovis Homes Group PLC (LSE:BVS) (BVS-GB) by 36%.
Barratt Developments (LSE:BDEV) will report half-year earnings July 10 and Bovis Homes (LSE:BVS) will announce 2008 interim results on Aug. 26.
Spokesmen for Barratt, Persimmon, and Bellway (LSE:BWY) declined to comment and spokesmen for Redrow (LSE:RDW) , Bovis, Taylor Wimpey and Quintain Estates could not be reached.
Company Web sites: http://www.barratthomes.co.uk http://www.persimmon.plc.uk http://www.bovishomes.co.uk http://www.taylorwimpey.com -By Gabor Debreczeni, Dow Jones Newswires; 44-20-7842-9407; gabor.debreczeni@
dowjones.com
(END) Dow Jones Newswires 06-09-08 1112 Copyright (c) 2008 Dow Jones & Company, Inc.
