5 days ago
Mortgage rates remain a 'barrier' to prospective buyers, Persimmon says
Persimmon has flagged ongoing 'affordability constraints' across the property market, as falling mortgage rates fail to lift demand significantly.
The housebuilder ramped-up development over the first six months of its financial year, with completions up 4 per cent to 4,605 homes and forward sales up 9 per cent.
It told shareholders on Wednesday it is on track to meet its yearly target of completing the sale of 11,000 to 11,500 homes this year, and around 12,000 in 2026.
But Persimmon said demand remains subdued by external factors.
'While interest and mortgage rates have reduced, they are at levels that still present a barrier to many potential customers', it added.
The group, which has seen its average selling prices increase, said its homes 'are well placed in the market, with prices significantly below our largest competitors'.
It cautioned that margins would continue to face pressure from 'diminishing embedded build cost inflation, on-going affordability constraints and increased industry-wide costs'.
It added: 'However, with a stable housing market, we remain confident of further growth in outlets, volume and profit.'
Persimmon shares fell 2.07 per cent or 23.50p to 1,112.00p on Wednesday, having dropped around 30 per cent in the last year.
'General uncertainty, mortgage availability concerns, slowing construction activity and pressures arising from increases to the likes of National Insurance and stamp duty are meaningful headwinds', Richard Hunter, head of markets at Interactive Investor, said.
Persimmon remains upbeat, however, and anticipates higher completion numbers and profit for the full year.
In its half-year results, Persimmon maintained its annual guidance for completions and margins.
The group, which is more exposed to the first-time buyer market than some of its rivals, expects to deliver an operating margin of between 14.2 per cent to 14.5 per cent.
Persimmon said its predictions for new-build numbers and operating margins were upbeat, despite 'challenging market conditions, including uncertainty ahead of the Budget'.
The housebuilder forecast higher home completions next year, after its first-half profit beat market expectations as demand from private buyers picked up.
In the six months to 30 June, Persimmon saw completions rise by 4 per cent to 4,605, with private sales up 7 per cent.
Revenue from new housing jumped 12 per cent to £1.31billion, buoyed by an 8 per cent increase in the average selling price to £284,047.
Underlying operating profit rose 13 per cent to £172 million, while the firm's statutory pre-tax profit was broadly unchanged at £146.7million.
Persimmon's forward sales position at the end of June was £1.25billion, up 11 per cent on last year, with an average selling price just under £293,000.
Persimmon also lifted the number of sales outlets to 277, moving closer to its 300-outlet target, and invested £210million in new land at what it described as 'excellent margins'.
Looking ahead, the group aims to boost volumes to around 12,000 units in 2026.
Dean Finch, Persimmon's chief executive, said: 'While mindful of macroeconomic volatility we remain focused on driving further improvements to secure the medium-term growth ambitions we set out in March.'
