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Persimmon: First-Time Buyers Struggle with Home Affordability

According to one of the UK’s largest domestic property developers, Persimmon, sales of new homes to first-time buyers are struggling due to higher interest rates that have made mortgages less affordable.

The company mentioned that people looking to get on the housing ladder faced “stretched affordability” and fewer choices on home loans. Persimmon stated in a statement to the stock market on Wednesday that rising mortgage rates have led to higher loan-to-value ratios for first-time buyers, especially in regions with higher house prices.

The Bank of England is expected to raise interest rates for the 12th time next month by 0.25 percentage points to 4.5% as it aims to curb inflation, which unexpectedly remained above 10% in March.

Persimmon warned last month that housebuilders would face a “tough year” in 2023, indicating the housing market’s cooling and predicted sliding sales and a decrease in profits for the year.

In its update to the market on Wednesday, the company reported a 42% drop in new homes sold between January and March, with 1,136 properties compared to 1,950 in the same period last year. However, the company said that sales had begun to pick up in recent weeks.

Persimmon said that it was seeing “early signs of increasing consumer confidence,” particularly in demand for its three-bed homes and four- and five-bed.

Dean Finch, the CEO of Persimmon, said that trading over recent weeks had offered some signs of encouragement, with visitor numbers up, cancellation levels normalizing, and sales rates continuing the steady improvement evident since the start of the year.

If sales rates continue at present levels, the developer forecasts completed house sales for the year between 8,000 and 9,000 homes, which would be towards the top end of its previous estimates.

The company added that sale prices for its homes remained “firm,” although the private average selling price of £276,000 marked a slight fall from £282,100 recorded at the end of 2022.

As a result of improved rates of homes sold over the past three months, Persimmon said its forward sales position had increased to £1.7bn since the start of the year when it was £1bn. However, the company stated it was hard to predict how trading would develop during the rest of the year but noted that long-term demand for new homes remained “robust.”

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