British housebuilder Persimmon has warned new home sales could fall by up to 40 per cent this year if demand stays as it is, sending shares down almost 10 per cent.
The FTSE 100 group, one of Britain’s biggest housebuilders, said if current trends persisted by 2023, sales could fall to 8,000 compared to more than 14,000 last year.
But the company stressed that it was too early to give firm guidance. The property market slowed significantly last year after mortgage lenders put up rates in response to the fallout of the UK “mini” budget in September.
“The main challenge today is the affordability and availability of mortgage products,” said Dean Finch, chief executive of Persimmon. “It is too early to assess sales rates for the year as a whole.”
UK housebuilders have cut back on land purchases and building new properties as the market slows. The Federation of Home Builders said this week that supply could reach its lowest level since the second world war in the coming years, due to higher mortgage rates and environmental and planning regulations.
Persimmon had a strong year for sales for most of 2022, helping to push underlying profits before tax up 4 per cent to £1bn, but sales slowed towards the end of the year.
“The rate of sales seen over the last five months means that completions will drop significantly this year and as a result, margins and profits as well,” said Finch, but added: “We believe 2023 will represent a floor in our volumes. The long-term fundamentals of the UK housing market stay strong.
The board recommended a dividend of 60 pence a share for the year, down 75 percent from last year.
Mortgage provider Nationwide also published UK-wide house price data on Wednesday. This represents the biggest drop in a decade between February this year and last year, which was 1.1 percent. It was also the first annual decline since June 2020 when the housing market was frozen due to the Covid-19 lockdown.
Housing secretary Michael Gove changed the government’s housing targets in December to make it easier for local councils to cancel or refuse development, in response to complaints from Tory MPs.
Roger Devlin, chair of Persimmon, said housebuilders are likely to fall behind the government’s target for the supply of new homes. “We constantly remind the political class about the national need for 300,000 houses to be built every year. I hope [figure] for 2023 it may not be more than half this number,” he said.