* 127 mln euro property writedown wipes out full-year profit
* Dutch property unit to report 50 mln euro operating loss
* BAM shares down 7.2 percent
* Dutch property stocks Heijmans, Ballast also drop on news
(Adds CEO, analyst comments, background, updates shares)
By Aaron Gray-Block
AMSTERDAM, Nov 4 (Reuters) - Dutch builder BAM booked a 127 million euro ($180 million) property writedown on Thursday because of an increasingly gloomy domestic housing market which it said would wipe out profits for the full year.
The warning knocked as much as 10 percent off BAM's share price and dragged down other property stocks as it stoked fears the sector could take far longer to recover than expected.
BAM, the largest Dutch construction group, said it was impossible to predict when the domestic residential market would rebound.
The downturn is already taking a wider toll: consumer confidence remains subdued and local governments are expected to raise less from property-related taxes. But analysts see little impact at this stage on the banking sector.
"In recent months we have seen an increasing number of negative reports from the Dutch housing market, as sales decline further, councils put projects on ice and capacity is cut," Chief Executive Nico de Vries said on a conference call.
Several agencies have warned that the property market remains in a fragile state.
The Dutch construction institute EIB said recently it did not expect a recovery in construction until after 2011, and that it expected employment in the Dutch construction market to fall by 9 percent this year.
Statistics Netherlands (CBS) said this week the housing market remained stagnant, with house prices unchanged since last year. Prices in September were still 6 percent below the level seen in August 2008 prior to the crisis, it added.
Roeland Kimman, a spokesman for the Dutch real estate association NVM, said the group was hoping that the number of house sales would be stable this year compared with 2009.
"There is no real recovery as the consumer is still hesitant," Kimman said, adding the NVM would make no projections about 2011 until its fourth quarter report in January.
But BAM CEO De Vries said he expected the company's property unit to sell a slightly higher number of houses next year.
NASTY SURPRISE
BAM said it would write down property positions at its Dutch development firm AM and that it expected AM to report a full-year operating loss of 50 million euros. It posted a first-half operating loss of 20 million euros.
Profitability of its other sectors exceeded expectations, however.
Shares in BAM tumbled 7.2 percent to 4.524 euros at 1203 GMT to an eight-week low in a positive Amsterdam market, while rivals Heijmans and Ballast Nedam were down 2.7 percent and 2.1 percent, respectively.
"The impairment was not expected, and that is a nasty surprise," said Tom Muller, an analyst at Theodoor Gilissen, who still kept his "buy" rating on the stock because he had already expected AM to report a 35 million euro 2010 operating loss.
Muller added he expected to see signs of a recovery in 2011.
An analyst at a Dutch asset manager, who declined to be quoted by name, said more defaults on home mortgages were possible but not on the same scale as in the United States.
He also played down the impact on banks' results, saying that lenders would be unwilling to foreclose quickly and were more likely to reschedule payments or reduce the mortgage.
BAM did not provide a profit outlook earlier in the year, saying only it expected turnover of about 8 billion euros and that the Dutch residential market appeared to have stabilised, albeit at a low level.
BAM increased its exposure to the domestic property market when it raised its stake in property unit AM in 2008.
"We bought AM at the height of the market. We could not foresee the collapse of the housing market," De Vries said. "In hindsight it was not a happy investment."
But BAM added that at end-September it met the requirements of its financial covenants and there was no compelling reason to write down the value of the AM unit itself.
For a FACTBOX on the Dutch housing market:
(Additional reporting by Marcel Michelson and Gilbert Kreijger; Editing by Sara Webb and Will Waterman) ($1 = 0.7071 euro)