Bovis predicts cooling of house prices

The construction firm Bovis today predicted a falling off of property prices as it reported a 46% rise in first-half profits.

The company said pre-tax profits in the six months to June 30 were ?67.2m on turnover of ?271.1m as it continued to feel the effects of a sustained UK housing boom. The figures were up from profits of ?46m and turnover of ?190.6m a year ago.

Reinforcing impressions that Britain's red-hot property market was coming off the boil, Bovis said there were signs that house prices were settling back to more sustainable levels.

"Since the end of June of this year, the housing market has begun to return to a more stable level of activity following interest rate rises in recent months," the company said in a statement. "Increases in house sales prices are expected to moderate in the second half of 2004, generating price improvements at more sustainable levels."

Recent weeks have seen a steady trickle of data indicating that the housing market was losing momentum following five interest rate increases since November.

The Bank of England's monetary policy committee meets this week, but is expected to leave rates at 4.75% following last month's quarter-point move.

House prices fell by 0.6% in August - their first decline in two years - according to the Halifax, Britain's biggest mortgage lender. Meanwhile, the Nationwide building society reported prices inching ahead by just 0.1%, well below the 2% rates seen earlier in the year.

More forward-looking indicators such as mortgage approvals - loans agreed but not yet made - have also fallen sharply over recent months. However, Bovis said the housing market remained in good shape.

"The fundamentals of the housing market remain solid. Despite interest rate rises to date, affordability is good, with demand exceeding supply for new housing," the company's statement said.

Bovis markets a wide range of properties covering the main sectors of the housing market, from two bedroom cottages through to family homes including luxury properties. It also markets apartments and retirement homes.