Persimmon built 40% of homes last year in final quarter as profit halves in wake of mini-Budget

Persimmon has reported a 52% drop in its annual pre-tax profit, which it said was due to last year’s high interest rates hitting demand for new homes.

The housebuilding giant, in its results for the year to 31 December, reported pre-tax profit of £351.8m, less than half the £730.7m posted the previous year. Turnover fell 26%, to £2.8bn from £3.8bn over the same period.

Dean Finch, chief executive of Persimmon, said customer confidence was “impacted by more limited mortgage availability following the [September 2022] mini-Budget and stretched affordability”, compounded by the removal of Help to Buy in October of that year.

He pointed to figures showing the average two-year mortgage fix was 5.9% compared to 2.4% on average two years earlier. The group’s underlying new housing gross margin fell from 30.9% to 20.5% year-on-year.

But Persimmon finished the year more strongly than it had recently expected building around 40% of its units in the final three months of last year.

It said average private net sales increased to 0.41 per outlet from 0.28 at the end of 2022, pushing its average for the year to 0.58 but still down on the 0.69 posted last time.

Persimmon completed 9,922 homes in the year, a drop of a third on the 14,868 built in 2022. However, the 9,922 figure was higher than the 9,500 it was forecasting as recently as November, as the housebuilder built more than 4,000 homes in the last quarter.

The housebuilder is expecting to increase delivery to between 10,000 and 10,500 homes this year, although this is still substantially down on 2022 levels.

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Finch 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.” The group’s forward sales position edged up year-on-year from £1bn to £1.1bn.

Persimmon is one of eight major housebuilders being probed by the Competition and Markets Authority over alleged anti-competitive behaviour.

Ther housebuilder today said it will co-operate with the investigation.

Persimmon also said that it has renegotiated prices with subcontractors, which lowered build cost inflation in the second half of last year and which the firm said will result in higher completions this year.