Bovis Homes shares slumped after the housebuilder warned annual profit margins would be hit by planning delays and rising costs caused by labour shortages.
The company’s shares dived 11% in early trading on Thursday and are now 8% lower at 909.5p, dragging down other housebuilders Persimmon, Berkeley, Barratt and Taylor Wimpey.
The trading statement from Bovis coincided with official figures that showed a small recovery in the number of houses built in recent months, but there was also evidence of worsening labour shortages across the sector, while materials shortages have eased.
Bovis said the number of homes built this year would rise more than 8% from last year, while the average sales price is up 7%. Buyers have reserved 1,650 homes for next year, 18% more than at this stage last year.
But investors took fright as Bovis said it expected its operating profit margin for 2015 to be only marginally ahead of last year’s 17%. It blamed delays in planning decisions on a number of high profit-margin sites, as well as shortages of skilled tradesmen which have held back building and pushed up wages, although it added that this cost inflation was showing signs of moderating.
Official figures showed on Thursday that 34,250 houses were started in England in the three months to September, up 2% from the second quarter and from a year earlier. This reversed some of the dip in activity seen in the second quarter.
Terrie Alafat, director of the Chartered Institute of Housing, said: “It’s encouraging to see an increase in the number of homes being built, but today’s figures show that we have a long way to go. We have failed to build the number of homes we need for decades – the result is a housing crisis in which millions of people are struggling to access a decent home at a price they can afford.
“And the fact remains that during the year to September we only managed to build 135,050 houses – that’s just over half the number we need every year to keep up with our growing population and start tackling the shortfall that has built up over the years.”
Hansen Lu, property economist at Capital Economics, said: “With labour shortages worsening and unemployment already close to a record low, a rapid acceleration in housing starts appears to be unlikely in the near term.”
He noted that materials shortages, at least, appeared to be easing. The proportion of builders reporting materials availability as a major constraint on production fell in the latest quarter, and has fallen from 64% to 22% over the last year.
However, labour shortages have been worsening. The proportion of builders reporting labour costs as a major constraint ticked up from 33% to 36% during the third quarter, while for labour availability, this rose from 49% to 60% – the second highest reading on record.
