Housebuilders bounce back as sales surge

Britain's housebuilding sector will provide solid evidence this week that it has bounced back from the economic malaise that led to scores of construction firms going bust, despite the industry facing fresh headwinds.

Persimmon is tomorrow expected to report profits jumping by nearly a fifth over 2016.
Persimmon is tomorrow expected to report profits jumping by nearly a fifth over 2016.

Two of the nation’s biggest housebuilders are poised to report double-digit increases in profits, overcoming a Brexit vote blip. The results come amid predictions that house price growth will ease back this year, while builders are facing soaring costs from the weak pound.

Charles Church owner Persimmon is first out of the stalls with its results due tomorrow, and is expected to report profits jumping by nearly a fifth over 2016 thanks to a surge in sales over the final six months. Buyer demand and house prices have been resilient since June’s EU referendum, thanks largely to record low borrowing costs and improved mortgage supply after the Bank of England halved interest rates to 0.25 per cent in August.

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In its last update, Persimmon said the autumn selling season had seen robust sales reservations, boosted by readily available mortgage deals.

Analysts expect the group to post a 19 per cent hike in pre-tax profits to £756 million. This would mark a slowdown on the 34 per cent earnings growth notched up in 2015, but Persimmon has hailed a strong performance over the second half of last year.

Robust results are also expected from industry heavyweight Taylor Wimpey, which is due to report a day later, after the group said last month that profits were likely to come in at the upper end of City forecasts.

Taylor said home completions rose 4 per cent in 2016, but it was the 11 per cent hike in average selling prices to £255,000 that stood out. Analysts at Jefferies are pencilling in a 21 per cent leap in pre-tax profits to £728.3m. They noted: “The group is unfazed by the uncertainty in the wider economy and remains on track to meet its three-year targets.”

The City will be watching outlook comments closely, though, after recent property sector reports have suggested price rises are slowing. The Halifax index showed house prices dipped for the first time in five months in January – down by 0.9 per cent month-on-month.

This week’s results will be followed on 9 March by full-year figures from Edinburgh-based Miller Homes. In September, the group said it was pressing ahead with its “substantial” land investment programme after booking a sharp rise in interim profits.

Earlier this month, fellow Edinburgh-based housebuilder Cala said it was “particularly positive about where the Scottish economy’s going” after reporting what it called a “very strong” first half.