Persimmon signals housing slowdown as sales slump amid recession fears
Soaring interest rates and economic uncertainty are eating into sales and reducing consumer appetite for housing, revealed one of the UK’s leading house-builders.
In its latest trading update, FTSE 100-listed Persimmon confirmed its weekly and forward sales rates had slumped since July.
Over the past three months, Persimmon averaged net private weekly sales rate per outlet for the period of 0.60, compared 0.78 during the same time period last year.
It also only secured £0.77bn of forward sales reserved beyond the current year, compared £1.15bn in the same window of trading 12 months ago.
The results indicate the start of a property slowdown, and the looming recession – which could be the deepest and most severe in nearly a century.
The company said: “Rising interest rates and broader economic uncertainty are clearly impacting mortgage lending and customer behaviour and this is reflected in our recent weekly sales rates and forward sales position.”
Nevertheless, the company is bullish about its prospects, with average selling prices below market averages to attract customers and a robust balance sheet to endure a now widely predicted recession.
The group said: “Our highly experienced senior operational management team are drawing on their decades of detailed knowledge across many housing cycles to continue to rigorously assess every aspect of our business to ensure we are building quality homes for customers in the most cost-efficient manner.”
Persimmon also announced a new capital allocation policy to provide shareholders with sustainable returns while investing in future success.
The company has made good progress on build rates in 2022, which are 20 per cent ahead of the prior year.
It is now on track to deliver its full year 2022 volume target of between 14,500 to 15,000 homes, despite increased risk from recent elevated cancellation rates.
The house-builder’s projected cash position for the end of the year is £700m, after total capital return of £750m paid in the year to date.
Persimmon further reiterated its promise to shelter leaseholders from the costs involved in replacing cladding.
It said: “We were proud to lead the industry with our pledge to protect leaseholders from the costs of cladding removal in any multi-storey development built by Persimmon. We have made good progress and continue to proactively engage with management companies to agree work plans.