UK housebuilder Persimmon warned of fewer completions and a hit to margins due to weaker demand as the cost-of-living crisis forced customers to delay purchases.
The company on Tuesday said cancellation rates had fallen to 28% from 21% in the last six weeks after the government’s disastrous mini budget – which saw thousands of mortgage offers pulled from the market – and rising interest rates.
“Rising interest rates and broader economic uncertainty are clearly impacting mortgage lending and customer behaviour,” said chief executive.
It added that the “uniquely disruptive political conditions and deteriorating economic outlook since September” had resulted in the average net private weekly sales rate per outlet falling to 0.48 over the past six weeks of its latest period of July 1 – November 7. Overall rates for the full period fell to 0.60 from 0.78 a year earlier.
Average selling price for private reservations over the same period fell by around 2% compared with the 12 weeks commencing 1 July.
Persimmon did not provide guidance for 2023 given the recent and rapid change in market conditions. “Our current expectation is for fewer legal completions than in 2022 and this together with a deterioration in average selling prices will have an impact on 2023 margins,” it said.
There was also an increase in provisions to £350m for meeting government building safety regulations introduced after the Grenfell tower fire in 2017 which killed 72 people.
Reporting by Frank Prenesti for Sharecast.com
