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Persimmon warns new home sales may fall 40% on current trends

UK housebuilder Persimmon has warned its new home sales could fall by up to 40 per cent this year if demand stays as it is now, sending its shares down almost 10 per cent.

The FTSE 100 group, one of the UK’s largest housebuilders, said if current trends persisted throughout 2023, sales could fall to 8,000 compared with more than 14,000 last year.

But the company stressed it was too early to provide firm guidance. The property market slowed sharply last year after mortgage lenders put up rates in response to fallout from the UK “mini” budget in September.

“The key current challenges are affordability and mortgage product availability,” said Dean Finch, Persimmon chief executive. “It is too early to assess sales rates for the year as a whole.” 

UK housebuilders have already cut back on land purchases and building new property as the market has slowed. The Home Builders Federation said this week that supply could hit its lowest levels since the second world war in the coming years, because of higher mortgage rates and environmental and planning regulation.

Persimmon had a strong year for sales for most of 2022, helping to push underlying profit before tax up 4 per cent to £1bn, but sales slowed towards the end of the year.

“The sales rates seen over the last five months mean completions will be down markedly this year and as a consequence, so will margin and profits,” Finch said, but added: “We believe 2023 will represent the floor in our volumes. The longer term fundamentals of the UK housing market remain strong.”

The board recommended a dividend of 60 pence a share for the year, down 75 per cent from last year.

Mortgage provider Nationwide also published UK-wide house price data on Wednesday. These showed the biggest decline in a decade between February this year and last year, of1.1 per cent. It was also the first annual decline since June 2020 when the housing market was all but frozen by the Covid-19 lockdown.

Housing secretary Michael Gove changed government housebuilding targets in December to make it easier for local councils to scale back or reject developments, in response to complaints from Tory MPs.

Roger Devlin, Persimmon chair, said housebuilders would likely fall behind government targets for new housing supply. “We are constantly reminded by the political classes of the national need for 300,000 homes to be built every year. I expect the [figure] for 2023 may not be much more than half this number,” he said.

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