Persimmon: 'Too early to say when buyer demand will recover''

Higher mortgage rates and the end of Help to Buy has had a “sharp impact” on sales rates, Persimmon has warned.

A trading update from the housebuilder ahead of its full-year results warned that higher mortgage rates, inflation, heightened market uncertainty and the end of reservations under Help to Buy in England, have affected its private sales rates in the fourth quarter and will have an adverse impact on the outlook for 2023. 

It said: “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 year compounded by limited availability of high loan to value mortgages.”

Persimmon highlighted that it is promoting initiatives to stimulate demand, including the recent launch of its '10 months mortgage free' customer offer, which generated a strong increase in website enquiries in its first week.

But the brand said it is too early to predict when there will be a recovery in demand. 

It said: “We remain focused on achieving quality returns rather than volume and we will provide a further update on the market outlook for 2023, at our 2022 results on 1 March.”

Dean Finch, group chief executive of Persimmon said: “Persimmon has delivered a strong performance for 2022 which has been achieved despite headwinds from supply constraints in the early part of the year and a more challenging sales environment in the second half. We delivered 14,868 new homes to customers in the year, towards the top end of our guidance, whilst maintaining five-star quality. Customers remain at the heart of our business with our continued focus on quality and affordability.

"In the second half of the year, rising interest and mortgage rates, inflation and weaker consumer confidence began to impact customer behaviour across the housing market. 

“This change in market conditions gathered pace in the fourth quarter and is reflected in the reduction in our recent weekly sales rates and a lower forward sales position as we enter the new financial year .

"However, with high quality land holdings, a strong balance sheet and an experienced management team, Persimmon is well placed to navigate this challenging short-term backdrop, whilst continuing to take advantage of any opportunities that may arise.”

Finch said the longer-term demand for new homes remains strong, adding: “We have made significant progress over the past two years in augmenting the group's longstanding commercial excellence with renewed operational capabilities building a stronger, more sustainable business for the future.”