Persimmon profits slump to £351m as housebuilder warns of a tough year ahead

12 March 2024 , 11:15

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Housebuilder Persimmon said annual profits have more than halved in 2023 (Image: PA Archive/PA Images)

Housebuilder Persimmon has announced a halving of its annual profits and warned that 2024 will be another difficult year.

The company, which builds homes under the Charles Church brand, saw pre-tax profits fall to £351.8 million in 2023, down from £730.7 million the previous year. The number of new homes completed by Persimmon also fell by a third, from 14,868 in 2022 to 9,922 in 2023.

The group said the housing market is likely to remain "remain subdued" and "challenging" in 2024, with little sign of improvement ahead of a general election and with interest rates still high. Persimmon said it has seen a slight increase in demand at the start of 2024 as mortgage costs have eased back a little, but it is having to use incentives such as part-exchange deals to boost sales.

Shares in the group fell 4% in Tuesday morning trading. Persimmon said: "With interest rates expected to remain at current levels and a general election on the horizon, market conditions are expected to remain subdued throughout 2024." Chairman Roger Devlin said: "While demand remains high, affordability and mortgage availability has been difficult for many of our customers, especially first-time buyers.

"Thankfully, there has been some stabilisation in recent months with mortgage rates having fallen from their peak in July 2023. While 2024 will not be an easy year, I remain very confident of the exciting long-term prospects for the group."

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Private market house prices rose 5% to £285,774 in 2023. But the group revealed that, on an underlying basis, home sale prices came under pressure as an 8%-9% rise in build costs and the use of incentives offset increases.

The group said build costs have eased back to around 3%-5% in 2024. It is expecting to deliver between 10,000 and 10,500 homes this year, at an average selling price of £280,000 down 2% on 2023 values.

Persimmon said: "Enhanced competition in the mortgage market and wage growth have contributed to improved affordability albeit it continues to be constrained, particularly for first-time buyers, and demand for homes remains varied across the country. Trading in the southern and eastern counties remains more challenging with weaker pricing, offset by a more robust trading performance in the northern regions."

Lawrence Matheson