FTSE 100: Persimmon to build fewer homes as demand falls

A Persimmon banner flies at a new housing development near Manchester, northern England, July 7, 2008. British media reported on Monday that House builder Persimmon will confirm on Tuesday that it has made around 1,000 staff redundant. REUTERS/Phil Noble (BRITAIN)
Persimmon says demand for new build homes fell sharply in 2022 as mortgages costs surged. Photo: Phil Noble/Reuters

Persimmon has warned of falling sales as mortgage rises and macroeconomic woes restrict consumer spending.

The house builder plans to build fewer homes after seeing demand drop off in the final part of 2022.

Persimmon (PSN.L) has warned that current sales of its homes had fallen by more than 36% and that 2023 will be beset by multiple macroeconomic headwinds.

The house builder stated that customer demand was "notably weaker" in the second half of 2022.

This resulted in sales dropping from £1.6bn in the previous quarter to £1.0bn in the fourth.

The York-based building firm stated that higher mortgage rates, inflation, market uncertainty and the closure of the Help to Buy scheme in England had made a sharp impact on sales of new homes.

Persimmon also warned that those same factors would also weigh in on its performance in 2023.

In Thursday's trading update Persimmon Group chief executive Dean Finch said: “Taking together the absence of Help to Buy and the increase in mortgage rates, we estimate that 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.”

The UK-based home builder slowed the pace of buying over the fourth quarter and plans to take a cautious approach over 2023, stating that it would invest only in "the very best opportunities".

Persimmon's cash total at the end of the fourth quarter stood at £860m, down from £1.25bn in the previous period.

Persimmon shares rose in early trading on Thursday, up 4.26% to 1,351p.

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