Despite excellent first half-year and strong share price, housebuilder warns that performance will be affected

Bovis Homes this week warned the City that interest rate rises would affect performance in 2004, despite its excellent start to the year.

Malcolm Harris, the company鈥檚 chief executive, said he expected that strong growth in the first six months would be offset by a slowdown in the housing market over the rest of the year.

鈥淐onsumers have had a sharp shock, and I鈥檒l give the Bank of England its due as it has slowed spending,鈥� he said.

When Bovis announced its results for the six months to 30 June on Monday, it warned the City that, despite a strong performance, the market was showing signs of returning to 鈥渁 more normal level of activity鈥�.

Harris said the housing market had slowed in July and August as a result of the Bank of England鈥檚 warning that consumers should ease spending.

He predicted that house prices would rise just 2% in the next year, in line with inflation.

The business performed as well as expected, with pre-tax profit up 46% to 拢67m in the first six months; turnover rose 43% to 拢272m.

Harris said that Bovis was switching its focus away from buying land with planning permission, as prices here had probably reached their peak.

Instead, he said the firm would concentrate on its strategic landbank, which could generate higher margins.

Bovis completed 1252 homes over the six months, compared with 950 in the same period last year, and the average price per unit rose 8% from 拢190,800 to 拢206,500.

The average sales price per square metre increased 10%. This is because the company is building a higher proportion of apartments.

Harris said that its value-for-money range of housing was performing well, and added that the fundamentals of the housing market remained solid.

Bovis Homes鈥� share price rose 2% to 566.5p after the announcement.