Builders feel pain as house prices fall

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The cost of an average home fell by 2 percent in June, data from HBOS, the country's largest mortgage lender, showed on Thursday. Prices were 8.7 percent lower on the year, a bigger fall than at any time during the 1990s crash.

"It is fair to say we are now in the worst housing slide for over 50 years," said Michael Saunders, economist at Citigroup.

Barratt Developments, one of the country's best-known homebuilders, said it was going to lay off 1,200 people - a fifth of its workforce - because of the housing downturn. Nor would it pay a final dividend for 2007-08.

That took the total number of job cuts announced by homebuilders in the last week to around 4,000 as Persimmon, Taylor Wimpey, Bovis Homes and Redrow have all been warning of a sharp turnaround in business.

Austria's Wienerberger, the largest brickmaker in the world, reported on Thursday a 10 percent drop in its core earnings for the first six months of the year, because of a collapse in homebuilding.

"The spread of the financial crisis to Great Britain triggered a slump in new residential construction beginning in April," said Wienerberger.

SLUMP COULD GET WORSE

Hit by the global credit crunch, lenders have toughened up borrowing conditions, demanding as much as 25 percent of a home's value as a deposit before making any new loans - until relatively recently 100 percent loans were commonplace.

Mortgage approvals have consequently collapsed, pointing to even sharper falls in house prices in the months ahead. Rising inflation, meanwhile, is preventing the central bank from offering any succour.

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