Persimmon sells more homes than expected as mortgage rates ease

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Persimmon overshot expectations for new home building last year as falling mortgage rates helped to boost property sales at the end of the year, but warned of a “highly uncertain” housing market in 2024. 

The FTSE 250 housebuilder sold nearly 10,000 new homes in 2023, it said on Wednesday, more than the 9,500 forecast. The number of sales was a third lower than in 2022, which saw the end of the Covid-19 housing market boom. 

Chief executive Dean Finch said there had been a “sustained pick up in interest in our homes throughout the year” coming off the lows in late 2022 and early 2023 in the aftermath of the UK mini-budget. 

The sharp rise in mortgage costs as the Bank of England raised interest rates to tame inflation put the brakes on the property market, and imposed a particular strain on affordability for first-time buyers, who are key clients for new home builders. Home sales and first-time buyer numbers across the UK fell to a 10-year low last year. 

However, the downturn has not been as severe as was feared. Persimmon had warned its sales could fall as much as 40 per cent in 2023.

Mortgage rates have declined since the summer, with the average two-year fixed rate now at 5.81 per cent, down from 6.86 per cent, according to Moneyfacts. The BoE’s decision to hold interest rates steady has helped breathe life back into the housing market, with banks cutting rates in anticipation of a reduction in the base rate this year.

Big lenders Barclays and Santander announced fresh mortgage rates cuts this week, adding to cuts by HSBC and Halifax last week. 

“With inflation seemingly under control and interest rates peaking, we enter 2024 feeling more optimistic than this time last year,” said Dominic Agace, chief executive of estate agent group Winkworth. The company on Wednesday reported home sales by its agents were down nearly 20 per cent in 2023, but said a recent pick up meant it was entering the new year with more sales in the pipeline than at the same time last year. 

Persimmon also noted the “strong improvement” at the end of the year, reporting that each of its sites on average sold 0.41 home a week in the fourth quarter, excluding investor sales, compared with 0.28 a week the year before. 

Shares rose about 3 per cent in early trading, after rallying more than 40 per cent since October alongside other big housebuilders. 

But Persimmon warned that the market would be “highly uncertain” this year, particularly given the upcoming UK general election. Property transactions tend to stall around an election campaign as buyers wait for the outcome. 

Investec analyst Aynsley Lammin said the group had “understandably” not provided specific forecasts for the upcoming year. “Clearly the upcoming spring selling season is the next key catalyst for the sector and [the] key is how quickly Persimmon can build its site numbers back,” he said.