Rising interest rates and economic uncertainty are hitting the real estate market, Persimmon says
The owner of Charles Church said the average weekly sale rate per outlet in the private market fell to 0.6 between July 1 and November 7, from 0.78 a year earlier – and fell further at 0.48 over the past six weeks.
Customer cancellations have also increased, from 21% in the previous three months to 28% in the past six weeks.
He said the tougher selling conditions saw prices fall by around 2% in the six weeks to November 7, when Britain was gripped by financial market turmoil caused by the mini- unprecedented budget and political upheaval.
Persimmon said he remains on track for between 14,500 and 15,000 new legal home completions in 2022, but warned he expects fewer legal completions in 2023 and said the decline in price could affect its profit margins.
Dean Finch, Group Chief Executive, said: “Persimmon entered 2022 from a strong position with healthy forward sales and good weekly sell rates which continued through the first half of the year.
“This, combined with our increasing levels of construction efficiency, means we are well positioned to deliver new homes completed for the year within our previously stated target range, while maintaining industry-leading housing margin. industry, despite recent deterioration in market conditions leading to increased cancellation rates.
Mr Finch added: “Rising interest rates and wider economic uncertainty are clearly having an impact on mortgage lending and customer behavior, which is reflected in our recent weekly sales rates and our position of forward sale.
“Persimmon enters this more difficult period as a five-star builder, with average selling prices below the market average, high-quality land holdings and a strong balance sheet. The recent strengthening of our landholdings through disciplined investments will maintain our position as the industry leader in embedded margins.
“Our highly experienced operational management team draws on their decades of detailed knowledge over many housing cycles to continue to rigorously assess every aspect of our business to ensure that we build quality homes for customers in the way that works best. more profitable.”
Mr. Finch said the company recognizes the importance of sustainable returns for shareholders. He said Persimmon was putting in place a new capital allocation policy that balances this with the need to invest.
He added: “We were proud to lead the industry in committing to protect tenants from the costs of cladding removal in any multi-storey development built by Persimmon. We have made good progress and continue to work proactively with management companies to agree work plans.
“This proactive program, coupled with greater certainty about the expanded scope of work required by the government, means we are increasing our provision to meet our commitment to protect tenants.”