Taylor Woodrow cuts sales forecast

Weak mortgage lending figures and a warning from house builder Taylor Woodrow that its sales target for new homes will be cut by 6% added to the gloom in the property market yesterday.

The Council of Mortgage Lenders said it had seen the first year-on-year drop in gross lending for four years in September. The £25.4bn lent last month was nearly a quarter down on record figures in July and 2% lower than the September 2003 figure.

Separate figures from the Building Societies Association showed loans agreed but not yet made fell last month to £2.81bn, which compares with £5.15bn for the same month of 2003.

The data came 48 hours after a report showed the number of surveyors reporting a fall in house prices had reached a nine-year record.

Taylor Woodrow said yesterday that it had been forced to cut its sales expectations for 2004 from 10,000 to 9,400 homes and blamed "continuing negative media speculation" for causing buyers to delay their purchases.

Shares in the company - which put out a trading update ahead of a dinner with City analysts - fell 5% to 230.5p in early trading dragging down rivals such as Wimpey and Persimmon in their wake.

Taylor Woodrow insisted it would meet profit expectations for 2004 but said "the [UK] market has reverted to a lower level of activity compared with the extremely strong performance in the second half of 2003".

With low unemployment levels, relatively low interest rates and a shortage of housing stock, the UK housing market continued to remain attractive and prices were still inching upwards, it argued.

Stephen Rawlinson, analyst at Arbuthnot Securities, which has been a seller of Taylor Woodrow stock, believed some of the difficulties were self-inflicted.

"Taylor Woodrow has not adapted their product as quickly as some other house builders," he believed - building three or four bedroom houses when others had switched to apartments.

This might have partly resulted from the acquisition of Wilson Connolly, which had a different kind of property mix.

But Numis Securities said the sales slowdown indicated the property market was getting "tougher".

Although Taylor Woodrow said its sale prices were still rising there has been evidence elsewhere of a fall.

"With buyers still nervous and valuations in the market so stretched, recent modest falls in house prices will gather pace and become the dominant trend over the next two to three years," said Ed Stansfield of Capital Economics.

House prices are a key economic indicator in Britain because two-thirds of households own their own homes.

Much of the slowdown is the result of a series of interest rate increases but the Bank of England is now expected to keep them on hold.

Taylor Woodrow stock ended the day down 8.5p, or 3.5%, at 235p.

Earlier, Barratt's share price fell 4% with Persimmon down 3.5% and Wimpey off 3.75%.

Taylor Woodrow said it had completed the integration of Wilson Connolly and the "synergy benefits" were ahead of the 2004 forecast savings of £12.5m a year.

Taylor Woodrow also confirmed it would sell its K2 business in the first quarter of 2005 rather than in the last three months of 2004 as was planned. The trading update said the North American market remained "buoyant" and its housing division there would deliver higher profits than anticipated.