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Persimmon warns on 2023 outlook as forward sales fall

By Frank Prenesti

Date: Thursday 12 Jan 2023

Persimmon warns on 2023 outlook as forward sales fall

(Sharecast News) - UK Housebuilder Persimmon said forward sales had fallen by more than a third as customers deferred major purchase decisions amid the cost-of-living crisis, and warned the weaker economy would have an adverse impact on the outlook for 2023.
The company on Thursday said higher mortgage rates, inflation, heightened market uncertainty and the end of reservations under the controversial government 'Help to Buy' scheme hit private sales rates in the fourth quarter and forward sales were now down 36% to £1bn.

"Taking together the absence of Help to Buy and the increase in mortgage rates, we estimate that the monthly cash cost of mortgage payments for some first time buyers has approximately doubled over the past year1 compounded by limited availability of high loan to value mortgages," Persimmon said in a trading update.

"While we are promoting initiatives to stimulate demand, including the recent launch of our '10 months mortgage free' customer offer, which generated a strong increase in website enquiries in its first week, it is too early to predict when there will be a recovery in demand."

Persimmon completed 14,868 homes in 2022, up 2% year on year and toward the top end of guidance. Higher costs were offset by improved efficiency and house prices, which were up 5% on average over the year, to £248,600. That news helped to push shares in the company almost 6% higher.

Sales rates fell to 0.69 private net sales per outlet per week, from 0.83. Persimmon said customer demand was "notably weaker" in the second half, which fed into sales rates of 0.30 in the final quarter.

"Both Barratt Development yesterday and Persimmon today have flagged the slowdown in the housing market as a key headwind for the sector in 2023," said Interactive Investor head of investment Victoria Scholar.

"Rising mortgage rates, a slowing housing market, build cost inflation, the fallout from the mini-budget and the end of the Help to Buy scheme have been major challenges lately. Many potential property buyers are holding off amid hopes that mortgages rates will settle, and the housing market will become more affordable down the line."

"Persimmon's stock market valuation has almost halved over a one-year period, underperforming rivals Taylor Wimpey, Barratt Developments and Bellway. There is a rather pessimistic view on the stock from the analyst community with twelve hold or sell recommendations versus just six buys."

Reporting by Frank Prenesti for


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