Mortgage crisis drives Persimmon to freeze new starts

Persimmon has put a freeze on new developments until the mortgage market picks up.

In a trading update this morning, the housebuilder said the decision was taken against the backdrop of a 24% fall in sales revenue in the first few months of 2008, from £1.8bn to £1.37bn, and a 18% drop in sales volumes.

It said: “Close control of investments in work in progress, land, build costs and overheads are a priority. We are currently operating off about 5% more sites than a year ago. Against that backdrop we have postponed the commencement of scheduled new sites until the mortgage market improves.”

Persimmon made an appeal to the government to “urgently consider additional action to benefit first time buyers” by reducing interest rates further and increasing the threshold for stamp duty.

It warned that the market is set to become “more challenging” in the rest of the year.

Kaupthing analyst Kevin Cammack said that the announcement shows the group “falling into line with competitor comments on the state of the market”.

Despite what he called a “robust balance sheet”, Cammack said of Persimmon: “Its comments are every bit as negative as we had feared, perhaps a touch more so with the group seeming to have thrown in the towel on hopes of any second-half improvement and now reduced to pleading for government help.”