Thu 24 Apr 2008
New homes off menu until market recovers says Persimmon
Persimmon Homes is following Taylor Wimpey into the market’s malaise as the firm reports a 24 per cent drop in sales revenue, with an 18 per cent reduction in its property purchases.Persimmon Plc, the UK’s largest housebuilder by market value, is postponing construction on new sites, and is already working on five per cent less sites than at this time last year. This follows yesterday’s announcement from the British Bankers Association that British mortgage approval levels have fallen to their lowest level since 1997 as banks continue to withdraw offers on higher borrowing costs.
“It is difficult to predict when the market will improve,” Persimmon said in a statement at its annual general meeting. “Against the current backdrop, we have postponed the commencement of scheduled new sites until the mortgage market improves. Close control of investments in work in progress, land, build costs and overheads are a priority for our experienced management teams.”
The firm, whose sales revenue is down from £1.8 million this time last year to £1.37 billion, is now calling on the government to raise the stamp duty thresholds to free up the market for first-time buyers: “We welcome the recent actions taken to increase liquidity in the banking system, with the key objective of kick-starting the mortgage market,” Persimmon added. “For this action to be effective, it needs to result in an increase in the availability of credit for house purchasers, particularly first-time buyers.”
Persimmon’s top-end Charles Church brand, which makes up 15 per cent of its output, may also be affected by the market slowdown, financial management firm Merrill Lynch has predicted.
In an effort to counter the negative publicity surrounding new house sales, the HBF yesterday released its third annual Customer Satisfaction Survey, which showed that over three quarters of buyers are happy with the quality of their new homes.
The drop in new homes sales will impact badly on the government’s aims to build 240,000 homes a year, says Stuart Law, chief executive of Assetz: “Persimmon is not the first and will by no means be the last to announce a freeze on new starts – this is likely to be the beginning of a series of similar admissions across the industry.
“With the number of new-build homes decreasing over the short-term, we’re moving away the government’s targets to build three million homes by 2020, ultimately supporting house prices and leading to renewed growth in due course. I expect the outcome will be around 111,000 new homes being built in 2008 and 2009.”
Posted by Marc Da-Silva
in Assetz, British Bankers Association, Charles Church, Home Builders Federation (HBF), News, Persimmon Homes, Stuart Law on Thu 24 Apr 2008
Will this reduction in supply of new build properties significantly effect the market and help keep prices steady or will demand be satisfied by available second hand properties with prices falling anyway and people settling for second hand property even when their preference is for new?
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