Builder’s pledge to meet big housing demand

HOUSEBUILDER Persimmon has pledged to build more homes to meet soaring buyer demand, after Government schemes helped it deliver a 40 per cent increase in half year profits.

The York-based company also said that Yorkshire was one of the regions achieving a “good recovery” from the recession.

The company has 25 sites in Yorkshire, including properties in Morley and Brighouse in West Yorkshire, Rotherham in South Yorkshire, and Hull,

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The Charles Church and Westbury Partnerships group said more than 1,700 reservations had been made under Help to Buy since it was launched in April. The Help to Buy scheme allows those with only a five per cent deposit to buy new-build homes.

Underlying pre-tax profits for the first half of the year jumped to £135.3m from £96.9m a year earlier, with legal completions rising seven per cent and forward sales increasing by more than a fifth.

Persimmon said it expected demand from home buyers to continue picking up over the coming weeks and months as the housing market recovery gathers pace.

It vowed to increase home building activity, with plans to open another 85 sites by the end of the year, adding to 390 sites already under construction.

The company said: “The group is working hard to increase production in response to the improved demand evident in all our regional markets.

“To deliver the volume to meet this increased demand, we are maintaining our strong investment in land and stepping up our investment in construction.”

It is the latest builder to confirm a sharp increase in profits thanks to improved access to mortgages and the Help to Buy scheme. Bovis Homes on Monday reported a 19 per cent rise in interim pre-tax profits. Help to Buy has been boosting new build take-up, while the programme is also being extended next year to existing homes.

Mortgage availability has been helped by state initiatives, primarily the Bank of England and Treasury’s Funding for Lending scheme, which provides cheap credit to lenders in exchange for them providing mortgages as well as small business financing.

But there are fears that Help to Buy could lead to a housing market bubble and critics have been calling for a clear end date for the scheme. Persimmon – a recent entrant to the FTSE 100 Index – has seen reservations jump by 30 per cent since Help to Buy was introduced in April.

It said overall selling prices had remained stable in the first half, but private reservation prices had risen by five per cent to an average £179,199. Chief executive Jeff Fairburn said Help to Buy had certainly grabbed the public’s attention.

He added: “We’re very strong in Yorkshire – we understand the market. It is one of the areas showing a good recovery.

“Buyer sentiment is certainly improving. It looks promising for the future. The challenge is to step up build volumes.”

Earlier this week, Bovis Homes revealed that it had no plans to buy further sites in Yorkshire, despite signs that the property market is recovering.

The company said it planned to focus its investments in the south, where the economic revival is gathering pace.

However, Mr Fairburn said he did not see evidence of a north-south divide, adding: “We see a pretty good picture right across the board.”

Housebuilders are struggling to meet demand after an upturn in the market.

Mr Fairburn said Persimmon was starting to build on new sites as quickly as possible to meet pent-up demand for properties, and it expected to open a further 85 sites in the second half, on top of 90 in the first. Persimmon was also buying up land, spending £236m in the first half, up from £142m a year ago, with a similar sum earmarked for the second half.

Mr Fairburn said that, as well as improving sentiment across the market, Help to Buy meant Persimmon no longer had to fund equity loans, freeing up more capital to invest in land.

Wayne Gradwell, managing director for Persimmon Homes West Yorkshire, said: “In the first half of this year we successfully opened 90 new sites – including Bradford, Hipperholme, Garforth and Thurcroft – and expect to open a further 85 before the end of the year, with new developments due in Royston, Bradford and Morley.”

Analyst Anthony Codling, at Jefferies, said the company had delivered a solid performance. “We view Persimmon as a strong business, but on valuation grounds see better value elsewhere,” he said, pointing to Bovis and Barratt.

Analysts from Numis praised Persimmon’s “good performance” but said its shares were too expensive relative to its peers.