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Difficult times for builders | Print |  Email
Wednesday, 06 February 2008

The timing of land purchases is seen as one of the key factors in the increase in builders going into liquidation or receivership. Martin Whelan, public affairs officer with the Construction Industry Federation (CIF) explained: "In 2005 and 2006 there was a sharp increase in land prices and people who purchased then and are highly leveraged are in trouble". The general feeling is that builders who were in the market for more than ten years have bought land at reasonable prices before 2005 will survive these leaner times. While they are feeling the pinch due to a fall off in sales they have a good debt to equity ratio and this will keep their exposure to the banks down. Builders who bought land in the last three to four years and financed 80% of the purchase are now sitting on negative equity. Land prices have fallen, building has slowed and house sales have slowed. Banks are telling such builders to sell. More experienced and cash rich developers are buying up these lands and banks are satisfied their investment is safer.

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