Persimmon dismisses house market gloom

Housebuilder reports record pre-tax profits, a 34% rise in the dividend and expects an autumn upturn in prices

Steve Hawkes

One of Britain’s biggest housebuilders today moved to dispel fears of a sharp housing slowdown as it unveiled record half-year profits and increased its interim dividend by more than 30 per cent.

Persimmon said there was every reason to expect the “normal seasonal upturn” in demand in the housing market during the autumn.

John White, chairman, added that forward sales for the second half were £1.35 billion, ahead of last year. Total sales, including completions, were currently at 85 per cent of the group’s forecast for the whole of 2007.

Mr White said: “During the summer months the housing market is usually quieter. This has been the case this year.

“We believe that as long as current assumptions on interest rates remain intact, and employment data continues to be supportive, purchasers will feel confident about job security.

“This coupled with general confidence in the housing market should deliver the normal seasonal upturn in activity throughout the autumn selling period.”

The comments come a day after industry figures showed that asking prices in London had fallen for the first time in a year.

Separate data showed that while mortgage lending remains strong, the activity is largely being driven by homeowners remortgaging to lock in close to current interest rates rather than for new home purchases.

Persimmon revealed today that the number of completions across its business fell nearly 3 per cent to 8,002 in the first half of the year to June 30.

But higher margins meant the group’s pre-tax profits rose nearly 10 per cent to a record £281.1 million. Selling prices were higher in the north and central divisions, but fell 4 per cent to an average of £182,322 in the south after increased sales of affordable housing units.

Persimmon put the lower level of completions down to the amount of low margin homes sold a year ago by the Westbury business it bought for £643 million at the end of 2005.

Shareholders will receive an interim dividend of 18.5p per share, up 34 per cent. Persimmon said this reflected its strong performance and its stated desire to re-base the full-year payout at a higher level.