Persimmon has cut the number of homes it’s building by more than a third as the housebuilder faces up to rapidly rising mortgage rates and a slowdown in consumer confidence.
The construction company built a total of 4,249 homes in the first half of the year down from 6,652 homes compared to the same period last year, with the company blaming last autumn’s mini budget for a fall off in demand.
Total group revenue was also hit by the volatile market, shrinking to £1.19bn compared to £1.69bn and its underlying operating profit contracted to £152.2m down from £440.7m.
The business joins fellow house builders such as Bellway who have also seen a slow down in activity following the central bank’s decision to consecutively hike interest rates.
Just yesterday, Bellway said it completed the build of 10,945 homes in the year ended 31 July falling from 11,198 in the same period last year.
“Persimmon has revealed some gut-wrenching drops in its latest results as mortgage rates continue to strangle affordability, especially for first-time buyers, who represent the bulk of Persimmon’s customer base. Not only did completions drop by a staggering 36 per cent , but revenue and pre-tax profits also fell 30 per cent and 66 per cent respectively,” John Choong, an equity analyst at investing comparison platform, InvestingReviews.co.uk, said.
“The higher percentage of more expensive properties has helped to offset the astronomical decline in completions slightly. Even so, the short-term outlook for Persimmon isn’t bright as mortgage rates hover around their highest levels since 2008.
He added: “Those seeking a glimmer of hope will find some encouragement in the company’s forward sales position. Forward private sales — which yield higher-valued properties — are up 83 per cent since January. This should provide some support to Persimmon’s top line, helped by the slight uptick in private average selling prices as well.