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Persimmon reports sales fall as UK property market dips

Sales and prices of new-build houses have fallen, and cancellation rates have risen in recent weeks at Persimmon; in further evidence, the property market is entering a downturn.

The company, one of Britain’s biggest housebuilders, said demand had waned and uncertainty had risen in the past six weeks as rising mortgage costs and a looming recession weighed on people’s minds.

Dean Finch, the Persimmon chief executive, said: “Rising interest rates and broader economic uncertainty are clearly impacting mortgage lending and customer behaviour, which is reflected in our recent weekly sales rates and forward sales position.”

Persimmon completed 9,974 homes in the five months to 6 November, down from 10,728 a year earlier. It stuck to its forecast of between 14,500 and 15,000 completions for the year as a whole, even though cancellation rates increased to 28% in the past six weeks, from 21% in the prior 12 weeks, “introducing some uncertainty”.

In the past six weeks, the average net weekly sales rate at each outlet for private homes fell to 0.48, from 0.6 in the 12 weeks from 1 July (and compared with 0.78 a year earlier). The average selling price over the same period dropped by 2%, and Persimmon said its prices were below the market average.

The government’s help-to-buy scheme has closed for new applications, and such sales have accounted for a fifth of Persimmon’s completions this year.

The Investec housing analyst Aynsley Lammin said: “The sharp deterioration in recent trading clearly implies profits in 2023 will be much lower.”

Persimmon’s trading update echoed trends reported in recent days by the lenders Nationwide and Halifax.

Nationwide reported that property values fell by 0.9% last month, the first monthly drop in more than a year. The Liz Truss government’s mini-budget triggered financial market turmoil and pushed higher mortgage rates. Halifax reported a 0.4% fall in house prices in October.

Persimmon is cutting back on land purchases and is adopting a “highly selective approach … as we navigate the uncertain outlook for the UK housing market”. Land additions in 2023 are expected to be “significantly lower compared with 2022”.

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