Persimmon to slash building of new homes
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Persimmon will reduce new home construction as UK housing crisis deepens amid higher mortgage rates and cost of living crisis
Britain’s housing crisis appears to be getting worse after one of the country’s biggest builders said it will cut the number of houses it will build.
Persimmon said if headwinds continue — including higher mortgage rates and the cost-of-living crisis — it will build just 8,000 homes this year.
That would be a 46 percent drop from the 14,868 homes the FTSE 100 giant made last year.
Delayed sales: Persimmon said if headwinds continue – including higher mortgage rates and the cost-of-living crisis – it will build just 8,000 homes this year
It said the rate at which it sold homes slowed sharply in the last three months of 2022.
That followed Liz Truss and Kwasi Kwarteng’s disastrous ‘mini-budget’, which unleashed financial markets and led banks to raise lending rates and close some mortgage deals.
And while it’s “too early” to say how the year will go, Persimmon boss Dean Finch said mortgage affordability and availability were “key challenges.”
The warning came as data showed prices were falling at their sharpest pace in a decade, with £16,000 wiped from average value in just six months.
Nationwide said prices fell 1.1 percent in the year to February, the biggest drop since 2012.
And this week, the Home Builders Association warned that the supply of new homes will fall to its lowest level since World War II — from 233,000 last year to less than 120,000 in years to come — well below the government’s target of 300,000 a year.
Labor leader Sir Keir Starmer accused Prime Minister Rishi Sunak of “failing a generation” by not increasing the number of newly built houses.
Persimmon’s update followed a warning from Barratt, who said the market was experiencing a “marked slowdown.” In January, it reported a drop in revenue.
persimmon shares fell 12 percent yesterday. Barratt lost 4.2 percent, Taylor Wimpey 4.1 percent and Berkeley 2.1 percent.
Persimmon cut its dividend by three-quarters to 60p per share, or £200m, and Finch said the market “remains uncertain”. Recent sales declines mean margin and profit will decline, he added.
The average Persimmon home sold last year cost £248,616, a 5 per cent increase from 2021. Turnover rose from £3.6 billion to £3.8 billion.
But profits fell from £967 million in 2021 to £731 million.