Written by 11:08 am Europe Economy

UK’s Persimmon warns of housing slowdown amid higher mortgage rates

  • Shares gain on back of full-year 2022 performance
  • But Q4 weekly private net sales halved to 0.30 units/outlet
  • Current forward sales 1 bln stg vs 1.6 bln stg yr ago

Jan 12 (Reuters) – Britain’s second biggest homebuilder Persimmon (PSN.L) on Thursday joined rivals in warning of slowing demand amid higher mortgage rates and an economic downturn, though its shares rose on a generally better-than-expected performance for 2022.

The UK housing market has cooled in recent months, hit by a spike in mortgage rates and lower loan availability. Concerns about more interest rate hikes and the impact of red-hot inflation on households have added to the pressure.

Last month, UK housing prices slid the most since the 2008 global financial crisis, while the number of mortgages approved in November fell to the lowest since mid-2020.

The FTSE 100 firm said market conditions worsened in the fourth quarter, with weekly private net sales more than halving year on year to 0.30 units per outlet, and dropping to 0.19 in the last seven weeks.

The company gave limited detail on its 2023 outlook, adding it was too early to predict a recovery in demand.

Despite the clouds hanging over the sector, Persimmon said it built 14,868 homes in 2022, towards the top end of its target, and saw a 5% rise in private average selling prices.

Its shares climbed as much as 7.6% to a more than three-month high of 1,394.5 pence, boosting FTSE 100 peers Barratt (BDEV.L) and Taylor Wimpey (TW.L) too.

JP Morgan analysts in a note described the 2022 trading update as “mixed”, but said Persimmon had delivered better than expected top-line and net cash positions, while fourth-quarter booking levels came in line with bigger rival Barratt.

Persimmon said current forward sales – deals signed between buyers and builders with a future date – stood at 1 billion pounds ($1.2 billion), down from 1.6 billion a year earlier.

Barratt on Wednesday said it would build fewer homes this year than last, while its order book was down about a third in roughly the last four months of the year.

($1 = 0.8235 pounds)

Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Jason Neely and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

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