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Persimmon overshot expectations for brand new house constructing final yr as falling mortgage charges helped to spice up property gross sales on the finish of the yr, however warned of a “extremely unsure” housing market in 2024.
The FTSE 250 housebuilder offered practically 10,000 new properties in 2023, it mentioned on Wednesday, greater than the 9,500 forecast. The variety of gross sales was a 3rd decrease than in 2022, which noticed the top of the Covid-19 housing market increase.
Chief govt Dean Finch mentioned there had been a “sustained choose up in curiosity in our properties all year long” coming off the lows in late 2022 and early 2023 within the aftermath of the UK mini-budget.
The sharp rise in mortgage prices because the Financial institution of England raised rates of interest to tame inflation put the brakes on the property market, and imposed a specific pressure on affordability for first-time consumers, who’re key shoppers for brand new house builders. House gross sales and first-time purchaser numbers throughout the UK fell to a 10-year low final yr.
Nonetheless, the downturn has not been as extreme as was feared. Persimmon had warned its gross sales may fall as a lot as 40 per cent in 2023.
Mortgage charges have declined for the reason that summer time, with the common two-year fastened price now at 5.81 per cent, down from 6.86 per cent, in line with Moneyfacts. The BoE’s determination to carry rates of interest regular has helped breathe life again into the housing market, with banks chopping charges in anticipation of a discount within the base price this yr.
Large lenders Barclays and Santander introduced recent mortgage rates cuts this week, including to cuts by HSBC and Halifax final week.
“With inflation seemingly below management and rates of interest peaking, we enter 2024 feeling extra optimistic than this time final yr,” mentioned Dominic Agace, chief govt of property agent group Winkworth. The corporate on Wednesday reported house gross sales by its brokers have been down practically 20 per cent in 2023, however mentioned a current choose up meant it was coming into the brand new yr with extra gross sales within the pipeline than on the identical time final yr.
Persimmon additionally famous the “robust enchancment” on the finish of the yr, reporting that every of its websites on common offered 0.41 house every week within the fourth quarter, excluding investor gross sales, in contrast with 0.28 every week the yr earlier than.
Shares rose about 3 per cent in early buying and selling, after rallying greater than 40 per cent since October alongside different huge housebuilders.
However Persimmon warned that the market could be “extremely unsure” this yr, notably given the upcoming UK basic election. Property transactions are inclined to stall round an election marketing campaign as consumers anticipate the result.
Investec analyst Aynsley Lammin mentioned the group had “understandably” not supplied particular forecasts for the upcoming yr. “Clearly the upcoming spring promoting season is the subsequent key catalyst for the sector and [the] secret is how rapidly Persimmon can construct its website numbers again,” he mentioned.
