British homebuilder Persimmon has announced that it will build more homes this year than previously expected, despite uncertain market conditions for 2024. The company’s improved sales since the beginning of October have set it apart from its competitors Barratt and Vistry, who have recently highlighted challenges in the British housing market.
Shares in Persimmon rose by over 3% in early trading, buoyed by positive housing data from mortgage lender Halifax. The data revealed that British house prices ended six months of consecutive falls in October. This news has provided some relief to the struggling housing industry. Additionally, the Bank of England’s decision to keep interest rates steady at a 15-year high of 5.25% for the second consecutive meeting has also offered a glimmer of hope.
High mortgage rates have been a significant factor limiting sales throughout the year, prompting builders to issue profit warnings. This has occurred alongside the UK economy grappling with persistent inflation. Persimmon announced that overall pricing remains “broadly stable,” but private average selling prices in its order book have experienced a slight decline. Furthermore, build cost inflation has proven to be more stubborn than initially anticipated at the start of the year.
Persimmon reported an improvement in the private sales rate over the past five weeks, with a rate of 0.59 units compared to 0.45 homes during the same period last year. The company offers a range of homes, from studio apartments to five-bedroom houses.
To address the challenging market conditions, Persimmon has implemented a group-wide recruitment freeze, which is expected to result in a decrease of approximately 700 employees in 2023. The company, which is headquartered in York, northern England, expects to build 9,500 homes in 2023, surpassing its previous forecast of 9,000 units. Additionally, it anticipates that its annual operating profit will align with market expectations, indicating a two-thirds decrease from the previous year.
Investec analysts have noted that Persimmon’s recent sales rate pickup may be attributed to increased marketing efforts and additional selling incentives.
Overall, while Persimmon remains optimistic due to improved sales and positive housing data, it acknowledges the uncertain nature of the market for 2024. The company’s ability to adapt and navigate the challenges posed by mortgage rates and inflation will be crucial in determining its success moving forward.
More detail via ETRealty.com here… ( Image via ETRealty.com )