Persimmon raises target for new home construction to 10,500 this year

Persimmon expects to complete construction of around 10,500 homes in 2024 following a strong first-half performance.

The York-based housebuilding giant said the number of homes it completed rose 5 per cent to 4,445 new homes in the first six months of 2024.

These properties sold for an average of £263,288, up 3 per cent on the previous year, which Persimmon says reflects the increased proportion of new homes sold to private owner-occupier customers.

Persimmon’s pre-tax profits still fell £4.7m to £146.3m as its margins were hit by incentives and construction cost inflation offsetting house price rises.

However, the company said it was confident of delivering enough homes this year in line with the upper end of its previous guidance.

Its weekly net private sales rate in the five weeks since July 1 soared 68 percent year-on-year to 0.69 per outlet.

Britain’s residential construction industry is increasingly optimistic about enjoying a recovery in 2024 due to falling mortgage rates.

Home borrowing costs have risen over the past two years after the Bank of England raised the UK base rate 14 times in a row before lowering it when the BoE’s rate-tightening cycle ended.

When the BoE cut the UK base rate by 0.25 percentage points to 5 per cent last week, many lenders including NatWest, Virgin Money and Halifax responded by lowering their mortgage rates.

Persimmon also said it was “encouraged” by improved consumer confidence and recent planning announcements from the UK Government.

Dean Finch, chief executive of Persimmon, said: “The first half of the year has been strong, with improved sales rates and solid average selling prices, despite continued affordability challenges.”

‘Strengthening consumer sentiment, improving macroeconomic conditions and the Government’s welcome and ambitious planning reforms… support our ambition to grow this year and beyond.’

The new government wants to build 1.5 million new properties in five years, partly by overhauling planning laws and developing on lower-quality “grey belt” land.

Just 212,570 new homes were built across England in the 12 months to March 2023, well short of the previous government’s target of delivering 300,000 homes a year.

Persimmon shares rose 2.7 per cent to 15.80 pounds on Thursday morning, meaning they have grown by around 40 per cent in the past 12 months.

Russ Mould, investment director at AJ Bell, said: ‘The housebuilding sector is heavily reliant on the availability of affordable mortgages and from that perspective the trajectory of borrowing rates is heading in the right direction.

‘Continued construction cost inflation and a fairly weak housing market helped limit margins in the first six months of the year, and investors will increasingly want to see evidence that these green shoots will translate into improved profitability.’