Small housebuilders face collapse as cash crisis bites

Small and medium-size housebuilders are facing financial meltdown as slowing sales and overpriced land banks combine to force them out of business.

Industry experts are predicting a swathe of bankruptcies in the sector as the housing market starts to wobble.

Roger Humber, strategic policy consultant at the House Builders Association, part of the National Federation of Builders, said: "It's serious, very serious indeed. It's tough times for everybody. I think that across the board the market is quite the worst that we have seen now for 15 years.

"If any of these companies have made unfortunate land purchases in the last year in order to keep in business, and then have found that their rates of sale have fallen back as far as many have, then it wouldn't be surprising if a small company found it was unable to continue paying the interest on that sort of purchase."

Humber's warning came as it emerged that Sunderland-based housebuilder Wilcomm Bespoke Living has fallen into administration after it managed to sell just one of 25 recently built homes.

Its last set of published accounts for the year ended 31 August 2006 showed Wilcomm posted a pre-tax profit of £104,000 on a turnover of £12.8m. The previous year it made a pre-tax loss of almost £1m on a much lower turnover of £2.6m

A spokesman for administrator Deloitte said: "It couldn't sell the houses it built. It had one complete development of 15 houses of which one was sold and another development of 10 houses which was very near to completion and no houses were sold on this development."

Four staff remain at the firm, while 26 others have been made redundant.

Deloitte said it was talking to "numerous parties" interested in buying Wilcomm's assets and was upbeat about the prospect of selling the existing developments as they stand.

It also pointed out that Wilcomm Homes Limited, which was incorporated late last year and also counts Wilcomm Bespoke Living director Kevin Wilde as one of its directors, is a totally separate legal entity and not in any form of insolvency.

Housebuilder Meadgate Western also went into administration last week owing £36m.

One regional housing specialist said: "We are seeing land deals come back on to the market that people thought were viable last year but no longer stack-up. Selling land at a loss and having no buyers for current developments is not a good place to be.

"These smaller pure housebuilders only have one form of cashflow - and if people stop buying homes that dries up. They can't afford to sit on land until the market perks up so often the only course of action is to fold."