UK home-builder Persimmon experienced a significant uptick in sales rates since October. Analysts from Investec suggest that this improvement may be attributed to increased marketing efforts and additional selling incentives. The housing market faces challenges, with elevated mortgage rates impacting sales and builders issuing profit warnings. Persimmon remains cautiously optimistic, reporting stable overall pricing but acknowledging a slight decline in private average selling prices within its order book. The company anticipates a reduction in headcount as part of a group-wide recruitment.
Persimmon, the UK homebuilder, plans to construct a higher number of homes this year than initially anticipated. However, it acknowledges the uncertainty in the market for 2024 due to factors such as mortgage rates and living expenses, which may discourage potential buyers. Despite this, Persimmon remains optimistic, especially in contrast to competitors Barratt and Vistry, who recently highlighted difficulties in the British housing market. Persimmon’s shares saw a more than 3% increase in early trading, benefiting not only from positive housing data provided by mortgage lender Halifax but also from the reassurance of the Bank of England maintaining interest rates at 5.25%, a 15-year high, for the second consecutive meeting. This decision, along with the encouraging news that British house prices halted six months of consecutive declines in October, offers some relief to the housing industry. Throughout a significant portion of the year, elevated mortgage rates have constrained sales, leading builders to issue profit warnings amid the UK economy grappling with persistent inflation. Persimmon noted that while overall pricing remained relatively consistent, there was a slight decline in private average selling prices within its order book. Additionally, build cost inflation proved to be more resistant than initially anticipated at the beginning of the year. Persimmon reported an enhanced private sales rate in the past five weeks, reaching 0.59 units compared to 0.45 homes during the same period last year. The company offers a diverse range of homes, spanning from studio apartments to five-bedroom houses. As part of the organization’s earlier-enforced group-wide hiring freeze, Persimmon anticipates a reduction in headcount by approximately 700 in 2023. The FTSE 250 company, headquartered in York, northern England, announced on Tuesday its projection to build 9,500 homes in 2023, surpassing the initial August estimate of 9,000 units, with an expected annual operating profit in line with forecast. Market expectations anticipate a roughly two-thirds decrease from the previous year. Investec analysts remarked in a note that the recent update suggests a slight improvement in sales rates since the beginning of October. However, they noted that this improvement appears to be influenced by heightened marketing efforts and increased selling incentives.
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