Persimmon boost for market as selling prices leap

The York-based company, the UK's largest housebuilder by market value, said legal completions in the six months to June 30 rose 16 per cent to 4,657 homes, with the average selling price rising eight per cent to 168,500.

Persimmon's chief executive Mike Farley said the increase reflected a rise in prices and a switch to traditional bigger family homes instead of apartments.

The group's shares rose over six per cent, a rise of 21.7p to 370.2p.

But the company sounded a note of caution with business over the summer set to follow traditional patterns and slow down as people go on holiday.

There is also an underlying worry about the wider macroeconomic picture and the outcome of the autumn budget which is expected to result in heavy public sector job losses.

"Since the Emergency Budget two weeks ago we have seen a resurgence in the number of people coming to our sites," said Mr Farley.

"The budget in October could have an effect on the public sector and jobs, but we'll see how things pan out in October. It's a tough one to call."

He said the group had already lived through job losses in the private sector and been able to cope. "Unemployment is a concern, but people still want to buy homes and there is a lack of supply. Affordability is still good and we are seeing low cancellation rates," he said.

The group opened five new sites in Yorkshire over the first six months and has plans to open another five in the second half of the year.

The sites are scattered across Yorkshire and include Grimsby, Selby, Leeds and Bradford.

Mr Farley said the North Yorkshire market has been the strongest in the county with strong price rises. Leeds and Bradford areas have been weaker.

Persimmon said first-half operating margins increased to 7.5 per cent from 1.5 per cent a year ago, in line with the group's strategy of improving margins and lowering debt, which fell to 122m from 494m last year.

It is expected that debts could fall to below 100m by the end of the year.

Analyst Robin Hardy at KBC Peel Hunt said: "We have been surprised by how well the market has stood up through the first half of 2010 and these provisional figures square with that. We are likely to raise 2010 pre-tax profit forecasts by at least 10m."

Analysts at Panmure said in a note: "Persimmon has released a cautiously optimistic trading statement. During the first half, volumes, average selling prices and margins all made good progress and gearing was further reduced. In our opinion this stock is fundamentally undervalued."

Total sales so far this year stand at 1.5bn, up from 1.3bn last year. Turnover over the six mon-ths rose 26 per cent to 785m.

The group said while it remains cautious, it has a strong platform for profit growth as and when the housing market improves.

Persimmon said cancellations remain at low levels in line with a year earlier at 16 per cent.

In a separate announcement Persimmon said non-executive director Richard Pennycook, who is also finance director of Morrisons, has been appointed chairman of Persimmon's audit committee with immediate effect. The move follows David Thompson's retirement as chairman of the committee. Mr Thompson will remain a committee member.

Taylor sees time of uncertainty

Rival housebuilder Taylor Wimpey has seen prices continue to rise amid "encouraging" housing market stability, but warned that depressed consumer confidence will create uncertainty for the full year.

The group, which has a number of sites across Yorkshire, said slowly improving mortgage availability had helped it to achieve 83 per cent of its targeted full-year sales already.

Taylor Wimpey said sales were dented in the second quarter as consumers delayed moving house around the date of the General Election.

The group expects to complete 4,650 homes in the first half at an average selling price of 167,000, compared with 4,702 homes at an average selling price of 153,000 in the same period last year.