Builder sees signs of buyers returning to market

HOUSEBUILDER Persimmon said sales continue to gather momentum despite the subdued housing market, with “encouraging” numbers of visitors to its sites.

The York-based builder, which owns the Charles Church and Westbury Partnerships brands, saw sales dented at the end of 2010 as the heavy snowfall and consumer uncertainty over spending cuts kept would-be buyers away.

But since the start of the year, its total value of sales reservations has increased by 12 per cent from a year earlier. Cancellation rates are low at 16 per cent, it said

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The group’s order book stands at £1.14bn, a similar level to a year ago. Shares in the housebuilder last night closed at 469.90p, a rise of 5.30p.

Jeff Fairburn, managing director of Persimmon’s northern division, said: “Generally the level of interest is still good. There are people who want to buy. They do have concerns but there are still a lot of people out there who need or want to buy a house.

“It’s subdued, but nevertheless it certainly has picked up from last year.”

Persimmon yesterday parted company with its chairman and former chief executive John White, who retired after 32 years’ service.

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Mr White was replaced at the group’s annual general meeting by Nicholas Wrigley, 55, executive vice chairman of investment bank Rothschild.

“I’ve had 32 years and it’s time for a change,” said Mr White, 60, who started out as a bricklayer.

“It’s the right time to hand over to the next generation to build on the platform.”

All resolutions were passed at the AGM in York.

Mr Fairburn said the new FirstBuy shared equity scheme, where the Government and housebuilders jointly provide a 20 per cent loan to top up first-time buyers’ own deposit of five per cent, is proving very popular. In two weeks Persimmon has already had 1,000 inquiries about the scheme.

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“In terms of first-time buyers there’s a pent-up demand,” said Mr Fairburn. “Deposits are still an issue for first-time buyers.”

He said products such as part-exchange are proving very popular with buyers.

Persimmon has shifted its product mix towards family homes, which are currently more popular with buyers.

Mr Fairburn said two-storey semi-detached or detached homes are proving more popular than terraced homes or apartments. It also expects to sell a greater proportion of its upmarket Charles Church homes.

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“In line with our continuing strategy of margin improvement, these sales will generate further margin growth,” said the group.

Last month Persimmon said it lifted underlying pre-tax profits to £95.5m in 2010 from £7m in 2009.

Revenues were 10.5 per cent higher at £1.57bn and the group’s underlying operating margin more than doubled to 8.2 per cent. Persimmon’s total house sales increased 4.5 per cent to 9,384 legal completions, although the south again proved stronger than the “more difficult” north.

It expects to sell about the same number of homes again this year, although selling more homes in the second half of the year.

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Mr Fairburn said the south is still “a little bit stronger” than the north, but its schemes in the north are proving successful.

“Jobs are a crucial issue to people,” said Mr Fairburn. “But we’ve got quite a lot of development in the Teesside area where they have had some good news on jobs at the steel works.”

Thai firm Sahaviriya Steel Industries last month took over the mothballed Corus steel plant in Redcar, bringing an estimated 800 new jobs to the site.

Persimmon’s developments in Yorkshire include sites in Pickering, Wakefield, Bradford and Hull.

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Across the UK the group has 380 active sites, which Mr Fairburn said leaves the group in a good position to take advantage of an upturn in the housing market.

He added the group is seeing “encouraging signs” on the planning front. The Government last year scrapped centrally-imposed housebuilding targets, giving councils discretion on planning and the amount of land to be allocated for housing.

“In the early stages it was difficult to see how it would work but we are now seeing that this process can work,” said Mr Fairburn. “It needs all parties to take it on board. Quite a few of the local authorities are positive about it and can see the benefit.”

The group said it continued to strengthen its finances by arranging a five-year £300m revolving credit facility with Royal Bank of Scotland, Lloyds Banking Group, Barclays, HSBC, Santander and Yorkshire Bank.

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