Forward Sales Plummet for Persimmon

PERSIMMON PLC revealed that forward sales of its homes have plummeted by more than half in the year ended 31 December 2022.

In its trading update, the housebuilder reports that 2021’s £1.1bn private forward sales dropped to £.5bn in 2022, a reduction of -56%.

Sales Plummet

In 2022 private net sales also fell to 0.69 per outlet per week for the year, compared to 2021’s 0.83.  Falling demand gathered pace in the final months of the year, with private net sales reducing further to 0.30 per outlet per week, with the last 7 weeks of 2022 at 0.19 per outlet per week.

Persimmon’s trading performance weakened across all regions with the biggest impact on sales seen in the Southern regions. The company says it saw a particularly sharp fall in demand on those sites where Help to Buy was more widely used once the scheme in England closed for new applications on 31 October.

Meanwhile the company increased sales by 2% completing 14,868 homes during 2022 with an average sales price of £248,000 – up 5% on the previous year. An average of 276 homes were built each week.

Persimmon’s in-house roof tile factory, Tileworks increased production through the year, along with its Brickworks and Space4 facilities.

Land spend for the year was £665m, nominally up on 2021’s investment of £460m, however £210m was spent on the settlement of land creditors. Land payments in Q4 were at a lower level compared with the first three quarters at £120m with £52m settling land creditors.

Persimmon owns or controls 87,200 plots at 31 December 2022 with 30 sites being either renegotiated or paused. The company expects land spend in 2023 to predominantly be on the settlement of land creditors, and it says it will take a “highly selective” approach to any new land purchases.

Outlook

Persimmon says the monthly cash cost of mortgage payments for some first time buyers has approximately doubled over the past year compounded by limited availability of high loan to value mortgages. While we are promoting initiatives to stimulate demand, including the recent launch of our “10 months mortgage free” customer offer, which generated a strong increase in website enquiries in its first week, it is too early to predict when there will be a recovery in demand. We remain focused on achieving quality returns rather than volume and we will provide a further update on the market outlook for 2023, at our 2022 results on 1 March.

Dean Finch, Group Chief Executive, said: “Persimmon has delivered a strong performance for 2022 which has been achieved despite headwinds from supply constraints in the early part of the year and a more challenging sales environment in the second half.

“In the second half of the year, rising interest and mortgage rates, inflation and weaker consumer confidence began to impact customer behaviour across the housing market. This change in market conditions gathered pace in the fourth quarter and is reflected in the reduction in our recent weekly sales rates and a lower forward sales position as we enter the new financial year.”

 

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