Persimmon warns of ‘highly uncertain’ 2024 despite recent rise in demand

It saw average weekly reservations slump to 0.48 from 0.63 a year earlier, but said it had seen a strong pick-up in the past five weeks, to 0.59, thanks to improved trading since the start of October.

The group’s forward sales have increased since the half year, to £1.6bn from £1.4bn, although it remains 23 per cent lower year on year.

It comes as recent market indicators also signal a tentative recovery in October, with Halifax’s latest house price index released on Tuesday showing values increased by 1.1 per cent on average month-on-month to £281,974.

This compares with a fall of 0.3 per cent in September.

Nationwide last week reported a 0.9 per cent rise in house prices month-on-month in October, thought to reflect a constrained supply of properties for buyers to choose from on the market.

But Persimmon said it was increasingly resorting to incentives to boost demand – standing at about 3.6 per cent on private sales on average in its third quarter – and gave a very cautious outlook over the year ahead.

Persimmon said: “Into 2024, we anticipate market conditions will remain highly uncertain.”

It added: “On the whole, pricing remains broadly stable although we have seen a slight reduction in group private average selling price in the forward order book and an increase in the use of incentives, particularly in the South where affordability constraints are greater.”

It said it had faced soaring build costs but added that these had “moderated” since the half-year thanks to a “proactive approach with suppliers and subcontractors to secure price reductions on both materials and labour over the past few months”.

Oli Creasey, property analyst at Quilter Cheviot, said: “The highlight of today’s trading statement from Persimmon is improved guidance for full year volumes, with the company now expecting 9,500 deliveries in 2023, compared to “at least 9,000” guided to over the summer. That’s good news for investors, as the declining volumes compared to prior years have been the main source of declining profits across the housebuilding industry.”

Charlie Huggins, Manager of the 'Quality Shares Portfolio' at Wealth Club, commented: “New home buyers are clearly exercising greater caution, and frankly who can blame them.

"Mortgage payments for first time buyers have soared over the past 18 months. When combined with the limited availability of high loan to value mortgages and the end of the Help to Buy scheme in England, it’s no surprise that the housing market has seen a marked slowdown.

“How much worse can things get? Well, interest rates are widely considered to have peaked meaning the first interest rate cut is a matter of if not when. It can't come soon enough for Persimmon. And it could mark the beginning of a strong recovery.”