Ritika Janiya
A major UK housebuilder, Persimmon, increased its housebuilding forecast for this year. The optimism is a result of new planning reforms adopted by the Labour government and improved consumer confidence after a recent interest rate cut. According to this housebuilder, Persimmon has strong growth expectations, with higher home sales, even when many challenges are yet to be resolved.
Persimmon, one of Britain’s largest housebuilders, has just revised up its housebuilding forecast for this year. This comes as new Labour government planning reforms should give impetus to the housing market. Further, Persimmon is also being witnessed at an increased potential buyer level due to rising consumer confidence, having been supported by a recent cut in interest rates.
The prospects of the company have brightened considerably with the Bank of England cutting its base rate from 5.25% to 5%. This base rate cut would lower the mortgage costs for people who want to buy homes and hence make it easier for people to purchase a house. For this reason, Persimmon feels that its housebuilding operations will benefit from it and more homes will be built and sold.
Labour has now come up with a new set of plans to restore housing targets and eliminate some bureaucratic red tape in the hope that these changes will expedite the procedure for building new homes in the UK. Persimmon is trying to do its best based on the thinking that new reforms will increase the number of homes which can be constructed and sold.
Persimmon has been encouraged by these early announcements from the government. The chief executive of the company, Dean Finch, commented, “We are encouraged by the early announcements of the new government, particularly around planning.” He said that while all these changes would take some time to get implemented fully, Persimmon was looking at expanding operations and increasing the number of development sites to more than 300 in the near future.
In the first half of the year, Persimmon completed 4,445 new homes, up 5% compared to the same period last year. Private home completions rose by 14% to hit 3,742 homes. This brilliant performance increased the confidence of the company in delivering about 10,500 homes by the end of the year, which is at the upper end of its forecast.
One of the freshest data published also shows an increase in UK house prices. Compared with June, Halifax said that house prices increased by 0.8% in July. The overall index also rose by 2.3% compared with July 2011, which was the highest annual increase since January. Also, property professionals of the Royal Institution of Chartered Surveyors expect house sales to rise significantly in the next few months. This is the highest expectation for sales since January 2020.
Dean Finch noted, “The first half of the year has been strong with improved sales rates and robust average selling prices, despite ongoing affordability challenges.” He then said that stronger consumer sentiment, better economic conditions, and the Government’s ambitious planning reforms all help support Persimmon’s ambitions for growth this year and in the future.
While Persimmon is focused on its optimistic outlook, there is a significant concern involving another major housebuilder, Barratt. The Competition and Markets Authority expressed fears that Barratt’s £2.5 billion deal to buy the smaller housebuilder Redrow would result in higher prices and worse quality homes for those buying in areas where the two firms have a big market share.
The CMA has indicated that both Barratt and Redrow individually have large land holdings in the area around Whitchurch, including nearby towns such as Nantwich, Ellesmere, and Market Drayton. If the merger were to proceed, the CMA feels that homebuyers in that area could be adversely affected. The regulator has invited both companies to come up with remedies for their concerns.
Overall, the increased forecast of Persimmon reflects a turn in the housing market, underpinned by new government initiatives and improved market conditions. Notwithstanding the challenges thrown at the sector, the Company still remains optimistic about its future growth and would have the capabilities to meet the housing demand of UK regions.
