Prospect of a hung parliament failing to put off house buyers

Housebuilder Persimmon said next month’s General Election is making it difficult to win planning permission for new developments, but buyers seem unaffected by the prospect of a hung parliament and demand is holding up.

Jeff Fairburn, CEO for Persimmon, York

The York-based company reported strong sales in the first 15 weeks of the year, resulting in a seven per cent rise in total forward sales revenue to £2bn.

Chief executive Jeff Fairburn said: “We are marginally ahead of where we anticipated. We were slightly unsure about the market in the run-up to the election, but we haven’t seen that uncertainty among buyers.

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“There could still well be a dip but so far we’ve seen no dip at all.”

Home buyers sometimes delay purchases ahead of an election, especially if different parties have varying attitudes to the housing market, but Mr Fairburn said all parties have committed to supporting an increase in new homes.

“I think the planning system has improved over the last couple of years, but it’s still taking too long to get sites started,” said Mr Fairburn.

“We are quite hopeful about the future. We’ve had very positive comments from all parties about new homes.”

He was speaking as the group updated investors at its AGM at York Racecourse.

Persimmon’s chairman Nicholas Wrigley told shareholders: “As anticipated, in line with past experience it has become increasingly difficult to secure planning consents for sites as May’s General Election approaches.

“While we would expect such delays to be short term in nature, they are hindering the expansion in the number of active outlets required by the housebuilding industry to support an increase in the volume of newly built homes delivered to the market.”

Despite this, the group said it has made an encouraging start to the 2015 financial year.

“Customer confidence is being supported by the ongoing improvement in UK economic performance and the mortgage market continues to offer customers the opportunity to access mortgage credit on very attractive terms,” said Mr Wrigley.

Mr Fairburn added: “So far we are pleased with trading. The key thing is people can get mortgages at very affordable costs.

“We aim at the first-time buyer and first-time mover market. The employment situation has improved and people want to get on with things.

“Help to Buy has really captured people.”

Help to Buy is a Government scheme that enables buyers to purchase their home with a deposit as low as five per cent.

“People feel more confident. There’s been a big boost to confidence with Help to Buy,” said Mr Fairburn.

Persimmon said its weekly private sales rate per site over the first 15 weeks of 2015 was six per cent higher than last year.

“We have 7,375 new homes sold forward into the private sale market for 2015 with an average selling price of around £207,900, which is four per cent higher than last year,” said Mr Wrigley.

The group has seen a 20 per cent increase in the level of visitors to its home-finder websites as increasing numbers of customers choose to find their new home online.

At the same time the number of customers visiting development sites remains in line with the strong comparative period last year while cancellation rates have continued to run at historically low levels.

The group has opened 85 of the 120 new sites planned for the first half of 2015 and it is currently developing 385 active outlets across the UK.

Persimmon’s shares fell 1.5 per cent to 1,733p following the comments about the election, but analysts discounted this, saying it was typical of the group’s management to be cautious.

Robin Hardy at Shore Capital said: “A cautious comment on the election and planning has upset the market but we see this as Persimmon playing to the gallery.

“Persimmon says it has become increasingly difficult to secure planning consents ahead of May’s election. We don’t really see that there is a major problem here. Firstly, Persimmon and the other house builders were fully aware that the election would cause councils to delay planning decisions so they bought more sites than they needed six to 12 months ago to provide a buffer.

“Secondly, any delays are likely to be short-lived as the hold-ups are purely political and are highly likely to unlock from May 8.

“Thirdly, Persimmon does not seem to be suffering any material impact with 85 of 120 targeted sites for 2015 already opened and restated confidence that the planned increase from 375 to 400 active sites will be achieved by mid-year.”