Developers usually blame delays in the planning system – this time it’s Liz Truss’ Mini Budget. – Owl
Joanna Hodgson www.standard.co.uk
Persimmon has warned that the turbulent housing market in the months after the fallout from the mini-Budget will result in profits and completions being “down markedly” in 2023.
The FTSE 100 housebuilding giant gave the update as it posted results that showed its current forward order book is worth about £1.5 billion, down substantially on the £2.2 billion recorded a year earlier.
Persimmon said: “Given the economic turmoil resulting from the “mini budget” in September 2022 and the adverse impact it has had on the UK housing market the group’s forward order book, including legal completions taken so far in 2023, is circa 30% weaker year on year.”
Total home sales completed increased to 14,868 last year from 14,551, but Persimmon warned that could tumble to 8,000 to 9,000 in 2023 if the current selling rates continue.
Chief executive Dean Finch said: “Sales rates seen over the last five months mean completions will be down markedly this year and as a consequence, so will margin and profits. However, it is too early to provide firm guidance.”
The order book fall partly came after a strong comparison year, with a housing boom during the pandemic as buyers sought more space and a change of scenery. But the decline also reflects the wider slowdown.
The industry has been under pressure since September, when higher interest rates added to mortgage costs. On top of that consumer finances have been hit from the cost of living crisis, and house prices are expected to fall this year.
Persimmon said sales rates have improved in the first eight weeks of the year, although the level is significantly below the same period a year earlier.
Finch said: “Looking further ahead, the fundamentals underpinning demand for new homes remain strong.” However, he added that market remains uncertain.
Pre-tax profit fell to £730.7 million from £966.8 million last year, reflecting money set aside for potential building safety remediation works.
Richard Hunter, head of markets at Interactive Investor, said: “Persimmon has ground out a creditable performance considering the challenges of the last year, although the current outlook is rather more troubling.”