Persimmon’s share price up despite warning of ‘highly uncertain’ year ahead
House builder Persimmon saw its share price close over six per cent today despite the firm warning of uncertainty next year, in a sign that markets may be cautiously restoring their faith in the housing market.
The FTSE 250 housebuilder said the number of new homes it built in the third quarter declined by 37 per cent, but the firm was continuing to trade in line with company expectations.
Persimmon also plans to build 500 more new homes this year, on top of its previously expected figure of 9,000 in August.
Over the past five weeks the firm said that private sales rates have improved to 0.59 per cent, up from 0.45 per cent in the same period last year.
News of the pick up comes after a depressing few months for housebuilders, as sky high mortgage rates and an increase in building costs led to a slow down in activity.
The Bank of England’s recent decision to keep interest rates at a record 15 year high of 5.25 per cent, following months of hikes, has also provided some relief for the sector.
Despite a more optimistic reading than previous months, Persimmon still warned that it expects market conditions to “remain highly uncertain”.
They said: “Into 2024, we anticipate market conditions will remain highly uncertain.
“But we are well positioned with our focus on delivering high quality sustainable homes for our customers at a price they can afford with our Persimmon Homes average selling price 25 per cent below the national average.”
Russ Mould, investment director at AJ Bell, said: “Housebuilder Persimmon picked a good day to update on trading as Halifax house price data showed the first price increase in seven months.”
“This helped paint the company’s statement in a positive light as it announced an increase in its build target for the year thanks to improved sales since the start of October.”
They added: “The sector is clearly not out of the woods yet but there are some shards of light creeping through a gloomy outlook.”
The share price of all major London-listed housebuilders rose today as markets appeared to be restoring their faith in the sector following Halifax’s latest reading.
Barratt Developments, Taylor Wimpey and Bellway all saw modest hikes of 2.67 per cent, 1.72 per cent and 1.74 per cent respectively.
The cost of a home rose 1.1 per cent in October, breaking a run of six consecutive monthly falls, the latest figures from Halifax showed.
Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club,said: “On balance, we’re probably nearer the end of the housing market downturn than the beginning. But we will need to see interest rate cuts and perhaps further house price declines to build the foundations for a recovery.”
“The one fly in the ointment could be house prices themselves. Prices have held up so far but this could be because there have been very few transactions. If the economy weakens further from here house prices could easily register further declines, causing further pain for Persimmon and its peers.”