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Bovis Homes returned to profit today but warned that government austerity measures have left the housing market in a “fragile” state.
The housebuilder posted first-half profits of £3.5 million having slumped to losses of £8.6 million in the period last year.
It said it will reinstate its dividend at the end of the year so long as the market does not go back into reverse, having last made a payment in 2007.
Bovis and rival housebuilders scrapped dividend payments when the housing boom turned to bust. Shares across the sector plummeted as sales dried up, house prices sank, and high levels of debt took their toll.
Bovis chief executive David Ritchie said he was “far more confident” than he had been in a long time, a sign the company and the economy are returning to health.
Figures on Friday are expected to confirm national output increased by 1.1% in the second quarter of the year.
Ritchie warned spending cuts and tax rises proposed by the coalition Government, and a lack of mortgage lending by banks and building societies, meant the recovery was far from secure.
“The housing market was stable during the first half of 2010,” said Ritchie. “In the last few weeks of the half year, after the general election and the Budget, the market became more fragile.
“The group therefore remains cautious given the low levels of consumer confidence at this time and the ongoing challenges in the mortgage market.”
He said first-time buyers in particular are struggling to get mortgages. Last month Bovis struck a deal with Barclays to provide high loan-to-value mortgages to buyers with small deposits. The bank is offering 90% mortgages to people who buy a Bovis home.
Bovis shares, which collapsed from 1204p in early 2007 to 270p in late 2008, fell 2p to 346.4p today.
It sold 803 homes in the first six months of the year, up from 754 in the same period of 2009, and the average sale price rose from £160,400 to £163,500. It hopes to sell 1,600 homes in 2010, about 5% more than last year.
Bovis bought 1,874 plots of land with planning permission for £107 million in the first half in a bid to boost future profits even if the market remains subdued.
Ritchie said: “We're not suggesting that house prices will rise, we're suggesting there is an opportunity to buy land today at current prices and make strong returns.”
