Persimmon reports strong housing demand post Brexit vote
UK housebuilder says forward sales are 12 per cent ahead of last year
Persimmon, the UK’s second-largest housebuilder, on Thursday reported an 8 per cent boost to revenues during 2016 as demand for newly built homes strengthened in the wake of the vote to leave the EU.
In a trading update, the group said revenues for the year were £3.14bn, in line with analysts’ expectations, while it ended the year with forward sales worth £1.23bn, some 12 per cent ahead of the figure a year earlier.
“Our product is aimed at first-time buyers, affordability is good and people really want to buy new houses and get on to the housing ladder,” said Jeff Fairburn, chief executive.
“We start 2017 from a strong position but we will need to see how trading goes in the spring selling period, which is an important period for the industry.”
Persimmon said its private sales rate in the second half of 2016 was 15 per cent ahead of the first half, with customer demand proving “healthy”. The average selling price of its homes increased by 4 per cent to £206,700, as completions rose 4 per cent to 15,171.
Shares in Persimmon opened up 3.4 per cent after the news.
The upbeat numbers contrast with a profit warning from fellow top 10 housebuilder Bovis Homes last week, prompted by production problems leading to a delay in some of its completions.
However, analysts said the trend across the sector was positive as peers including Taylor Wimpey and Barratt Developments prepare to issue updates next week.
Charlie Campbell, analyst at Liberum, said: “Persimmon’s update shows that 2016 ended strongly for the housebuilders.” The Markit/CIPS survey of UK construction firms climbed to a nine-month high in December.
Persimmon said: “We continue to see good opportunities to acquire additional land whilst remaining mindful of the risks associated with the uncertainty arising from the UK’s decision to leave the EU.”
Deutsche Bank on Wednesday upgraded its estimates for the sector to levels approaching its forecasts ahead of the EU referendum last June. Housebuilders’ shares dropped abruptly after the Brexit vote — Persimmon’s shares shed 33 per cent — but have since recovered most of that ground.
Deutsche said it had issued the upgrades because “both the UK economy and the housing market [have appeared] to largely shrug off the impact of Brexit”.
Housebuilders so far appear unhurt by a slowdown in transactions across the broader housing market, which has hurt groups such as Foxtons and Countrywide.
They have received widespread support from the government’s Help to Buy equity loan scheme, which provides loans for buyers of newly constructed homes so they can purchase with deposits of only 5 per cent. This supports about 45 per cent of Persimmon’s sales.
A government white paper on housing due this month is expected to outline further measures aimed at boosting construction. Persimmon will report final results for the year ended December 31 2016 on February 27.