Persimmon upbeat as order book hits £500m

Published on Monday 16 November 2009 20:20

HOME buyers are returning to the market, housebuilder Persimmon said yesterday, as it reported improved trading in the third quarter as well as lower debt.

"The market is encouraging: buyers are back; prices have stabilised and there is growing availability of mortgages," said chief executive Mike Farley.

The UK's largest housebuilder by market value met its sales targets for the year and booked a further 500 million of sales for 2010. Persimmon added that its debt position at the year-end will be "significantly lower" than its previous guidance of 400m, enabling it to purchase new land and open outlets.

"The focus now is on growing our margins, we are comfortable with our level of debt," which stood at 399m at the end of October, said Farley.

Panmure Gordon analysts said: "The key area of outperformance is the group's cash position and we believe that this should be taken positively by the market."

Shares in Persimmon closed up 28.5p or 6.5 per cent at 488.6p, continuing their rally of more than 17 per cent this month.

The builder, which now expects to complete 9,000 homes in 2009, said the average selling prices of homes reserved is 6 percent higher than at the start of July at 173,000.

The latest data and comments from rivals indicate house prices are nudging higher. British house prices in October recorded their lowest annual fall since March 2008 and a 1.2 per cent rise from September, according to mortgage lender Halifax. This is the fourth successive monthly increase in house prices.

Taylor Wimpey and Redrow both gave buoyant trading updates this month, reporting stabilising sales and house prices edging upwards.

Persimmon, based in York, said it had sold more houses, particularly two or three-bedroom homes, over flats, but first-time buyers were being tempted back to the market, making up 18 percent of the builder's order book in terms of reservations, up from 10 per cent a year ago.

However, low availability for higher-loan-to-value products remains a concern, despite growing customer interest in programmes such as the government's HomeBuy direct scheme, said the builder.

In the second half, Persimmon has agreed terms to buy 2,850 plots on 34 new sites, including 350 plots from its strategic landbank. Most are in the south of England.

Farley added that a general election and unemployment were also concerns for 2010, as uncertainty around the outcome of the election may hamper activity. In addition, a Conservative victory might hit enthusiasm in the sector due to the party's planning policy proposals, he said.