Homebuilders exceeded expectations for new homes despite economic weakness
The government’s housing campaign received a confidence boost on Tuesday after listed builders in London reported building more new homes than expected last year.
Persimmon and Cairn Homes achieved excellent results last year thanks to higher housebuilding volumes.
York-based Persimmon completed construction of 10,664 properties in 2024, an increase of 7 percent on the previous year and faster than market forecasts.
The growth was driven by private home completions rising 18 per cent to 9,075, offsetting a 30 per cent fall in new partnership homes.
The average sales price of a new home also rose by 5 per cent to around £268,500, which Persimmon said partly reflected the ‘improvement in market conditions’.
The UK housing sector has been going through challenging times for over two years due to interest rate rises and consumer weakness.
The Bank of England made fewer key interest rate cuts last year than initially expected, ultimately cutting them only twice to 4.75 percent, amid fears of a resurgence in inflation.
Mortgage interest rates are falling to a more affordable level, although the best interest rate remains above 4 percent for the time being.
This has stimulated a recovery in house prices and transactions.
Growth: Persimmon built 10,664 homes in 2024, an increase of 7 percent compared to the previous year
As a result, Persimmon’s current order book stands at £1.15 billion, up 8 percent year-on-year.
The FTSE 100 group also forecasts that underlying pre-tax earnings for 2024 will be at the higher end of market expectations.
Persimmon CEO Dean Finch said the company is “well positioned for the future, supported by the land and planning investments we have made in recent years, our vertical integration capabilities and our excellent teams”.
He added: ‘This investment, coupled with the government’s ambitious planning reforms that demand more of the high-quality, affordable housing that is Persimmon’s core strength, underpins our medium-term growth ambitions.’
Cairn also achieved strong growth last year, exceeding expectations in residential construction and operating profit.
The Dublin-focused company reported its profits rose by almost a third to around €150 million, while sales and completed units both grew by 29 percent to €860 million and 2,243 homes respectively.
Over the coming year, Cairn plans to expand investment in its construction business, which it says will “meaningfully increase” sales to its core first-time buyer market.
“There remains a limited supply of competitively priced and well-located new starter homes, and the supportive economic backdrop continues to drive very positive momentum,” the company told shareholders.
Meanwhile, fellow housebuilder MJ Gleeson said expected results for the 2025 financial year will exceed the previous twelve months and be in line with current market prospects.
The Sheffield-based group sold 801 properties in the six months ending December 2024, 32 more than the same period last year.
However, Crest Nicholson said adjusted pre-tax profits for the latest fiscal year were still likely to be at the lower end of the indicative range of £22m to £29m.
It has postponed the publication of its 2024 results by a fortnight to February 4 to give auditors more time to determine the full cost of improving fire safety in the high-rise buildings.
The Surrey-based company now estimates its total fire remediation provisions at around £245 million to £255 million.
Crest had previously forecast £145 million, but this estimate only covered around 45 per cent of affected buildings.
Dozens of housing developers have pledged to spend billions of pounds this decade on fire safety work in major buildings, including removing unsafe cladding.
Despite predicting additional costs, Crest Nicholson Shares were 2.4 percent higher at 160.1p on Tuesday morning.
MJ Gleeson shares were 4.2 percent higher on 461p, while Cairn Homes shares were 1 percent higher at 176.8p, and Persimmon Stocks were 5.6 per cent higher at £11.15.
Charlie Huggins, head of equities at the Wealth Club, said: ‘With low single-digit cost inflation expected for housebuilders in 2025, they cannot afford to see house prices move in reverse.
‘But the chance of that happening has increased since the Autumn Budget. This leaves the housing market in a precarious position at the start of the new year.”
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