UK housebuilder Persimmon has reported a stronger than expected fourth quarter with private forward sales ahead of last year. Forward sales of £1.06bn were slightly higher than in 2022.
The company’s latest trading statement is something of a mixed bag. New home completions totalled 9,922 for the year, down 33% on 2022 on the back of challenging market conditions – notably rising mortgage rates. However, the number was ahead of the 9,500 target given in November.
A J Bell investment director Russ Mould suggested a decent end to the year has breathed some life into Persimmon after a patchy start to 2023 which saw a profit warning and a dividend cut last March.
“While it saw a sharp decline in new home completions, the number achieved was better than expected. Average selling prices were also resilient”.
“The housebuilding sector has been shaken over the past two years thanks to inflationary pressures on costs and higher interest rates putting the dream of home ownership out of reach for many people”.
Mould added: “Hope that interest rates could start to come down in 2024 has already led to lower rates on mortgage deals, which in turn should lead to more people having a go at trying to buy a property. Tentative signs of this trend are already in motion.
“However, rates are unlikely to come down rapidly, and so housebuilders aren’t suddenly going to see a flick of the switch which turns the property market back to full health”.
Mould believes Persimmon is right to be cautious about the outlook, given that market conditions will remain highly uncertain this year.
“No-one knows with certainty how the Bank of England will act with interest rate policy. Furthermore, the upcoming UK general election could cause a few wobbles in the market if buyers and sellers sit on the sidelines waiting to see which rabbits are pulled out of the hat by the winning political party before committing to a transaction.”
