Persimmon exceeded expectations for new home construction last year. Falling mortgage rates helped boost property sales by the end of the calendar year. However, the company warned that the housing market will be “highly insecure” in 2024.
It was announced on Wednesday that the FTSE 250 homebuilder had sold more than 9,500 new homes by 2023. The number of homes sold was about a third less than 2022 when the housing boom of Covid-19 ended.
Dean Finch, the chief executive of the company, said that there has been “a sustained increase in interest in our houses throughout the year”, coming off lows reached in 2022 and 2023 following the UK mini budget.
Mortgage costs rose sharply as the Bank of England increased interest rates in an effort to curb inflation. This put a brake on the market and put a strain on first-time home buyers, which are the main clients of new home builders. Last year, the number of first-time buyers and home sales in the UK dropped to a decade low.
The downturn is not as bad as initially feared. Persimmon warned that its sales might fall by as much as 40% in 2023.
Moneyfacts reports that mortgage rates have fallen since the summer. The average rate for a two-year fixed term is now 5.81 percent, down from 6.86 percent. Banks have cut rates to prepare for a possible reduction in base rates this year, thanks to the BoE’s decision not change interest rates.
Barclays and Santander, two of the largest lenders in the country, announced new mortgage rate cuts last week.
Dominic Agace said that the estate agent Winkworth was more optimistic about 2024 than they were at this time last. “Inflation seems to be under control, and interest rates are peaking,” he added. The company reported on Wednesday that home sales were down by nearly 20% in 2023. However, it said a recent pickup meant the company was going into the new year with a greater number of sales than the same time last.
Persimmon noted the “strong improvements” at the end the year. Each of its sites sold on average 0.41 home per week in the fourth quarterly, excluding investor purchases, compared to 0.28 per week the previous year.
Early trading saw shares rise by about 3 percent, following a rally of more than 40% since October.
Persimmon, however, warned that this year’s market would be “highly unpredictable”, especially given the UK general elections. Property sales tend to slow down around election campaigns as buyers await the results.
Aynsley Lamin, an analyst at Investec, said that the group “understandably”, had not provided specific predictions for the upcoming years. He said that the spring selling season was the next catalyst for the industry. “The key will be how quickly Persimmon is able to rebuild its site numbers,” he added.