Cautious optimism ahead of builder Persimmon's update

The York-based Charles Church builder said in November that it expected to carry a "healthy" order book into 2010.

But its comments were laced with caution about the fragility of a market faced with the threat of higher unemployment and lingering problems with mortgage availability.

A lack of the higher loan to value mortgages generally needed by first time buyers is still a "significant concern", the firm added. Despite the worries over 2010, Persimmon should still have completed the sale of about 9,000 homes in 2009, compared with just over 10,000 in 2008. It saw strong visitor levels and a low cancellation rate of about 16 per cent – while it has made faster than expected progress in slashing the debt on its balance sheet.

Citi analyst Clyde Lewis is among the optimistic "bulls" on housing shares, arguing that recent share dips on fears of a "double dip" recession have been overblown. "The concern over the last few months has come principally from macro UK worries about 2010," said Mr Lewis.

"We think these are overdone with respect to the impact on the sector's profitability and in particular asset values."

On Persimmon he added: "We continue to feel that its track record as well as its strategic and normal land banks warrant a healthy premium rating within the sector."

Persimmon is the only major UK housebuilder not to have tapped shareholders for cash to strengthen its balance sheet.

Its net debt continues to fall and is now expected to be significantly below 400m. Its seven-year supply of land means to does not have to spend much to continue building, but its balance sheet gives it the firepower to pick up bargains.