Persimmon expected to profit from a resurgent housing market

Earnings at York-based Persimmon are expected to reflect the resurgent property market when it posts its half-year results on Tuesday.

The group, which trades as Charles Church and Westbury Partnerships, is expected to report pre-tax profit up by almost half to £196m compared with a year ago as it sold more homes and raised prices, according to analysts at Deutsche Bank –though the profits rise would only be 2.7 per cent on the previous six months.

In a trading update last month, the FTSE 100 listed housebuilder said sale completions jumped almost 28 per cent year-on-year to 6,408 homes during the period, while its average selling price lifted four per cent to £186,000.

Persimmon and other housebuilders are benefiting from the recovery in the economy and the Government’s Help to Buy scheme, which have buoyed house sales.

Fears of a housing bubble saw a new set of rules introduced under the Mortgage Market Review in April to stiffen affordability checks. This was followed by new rules by the Bank of England in June, which mean lenders must ensure no more than 15 per cent of new mortgages are given to people borrowing more than 4.5 times their income.

Lenders will also have to stress test borrowers’ ability to repay loans if their mortgage rates were three per cent higher than the rate at the time the loan was approved. But analysts say that although the mortgage market is showing signs of slowing, it still remains buoyant.

However, some said there was a question mark over why the four per cent price rises at the housebuilder trail rivals such as Taylor Wimpey.

Deutsche Bank said it “will look to explore why house price inflation at Persimmon appears to lag the peers”.

The momentum behind London’s property boom appears to be fading, according to a recent survey, which has added to signs that rapid house price growth in Britain is starting to moderate.

The Royal Institution of Chartered Surveyors’ monthly house price balance eased to 49 in July, its weakest reading since February.

Bank of England Governor Mark Carney has said the housing market represents the biggest domestic risk to Britain’s financial stability, so a sign the market is pausing for breath is likely to be welcomed by Bank officials.

House prices stagnated in July after strong growth in June, a survey from mortgage lender Nationwide showed recently.