Wednesday lunchtime business bulletin

Jun 11 2008 By Andrew Mernin

The UK’s major housebuilders took another stockmarket hammering today as fears over the property market sent shareholders rushing for the exit.

Investment bank Merrill Lynch downgraded six housebuilders, hitting stocks. The fresh warning followed concerns issued by Goldman Sachs and Dresdner Kleinwort analysts earlier this week.

Barratt Developments was the biggest casualty, falling 26%. Shares have fallen by more than half since trading began on Monday morning.

Taylor Wimpey was down 21% and nursing losses of 38% so far this week. Charles Church builder Persimmon - which is set to be relegated from the FTSE 100 Index - shed 9% and has lost more than 20% since Monday.

Mortgage lenders are set to change the way they value new build properties in a bid to avoid lending more than the homes are worth, it was announced today.

The Council of Mortgage Lenders (CML) said it was introducing new standards for the conveyancing and valuation of these properties following concerns from lenders that they were not always informed about the discounts and incentives being offered by developers.

With many builders offering deals on new homes in a bid to meet sales targets in the current market downturn, lenders have expressed concern that they could inadvertently be advancing more than the true price paid for the property.

Typical incentives include developers offering to pay buyers’ deposits, or legal and moving fees, or even offering cash-back incentives on completion of the sale.

Shares in Sunderland-based sofa chain ScS Upholstery have tumbled by more than a third after an insurer refused to cover five suppliers against the firm being unable to pay them.

The withdrawal of credit insurance for the firms - three of which are principal suppliers - comes amid increasing nervousness over the prospects for ``big ticket" retailers in a cooling housing market.

ScS said the unnamed insurer’s move had hit the short term finances of the suppliers involved.

The company said: ``Following the publicised withdrawal or tightening of credit insurance terms for the furniture retail sector, the company has been notified that one company has withdrawn credit insurance for ScS, affecting the working capital facilities of some of our principal suppliers.

"ScS is in discussions with each of the suppliers affected and is continuing to trade with them in the normal course of business whilst various financing options are being reviewed."

The pound at 10am was US$1.9533 compared to US$1.9548 at the previous close while the euro at 10am was £0.7928 compared to £0.7915 at the previous close.