16th Apr 2014 06:59
LONDON (Alliance News) - Housebuilder Persimmon PLC Wednesday said it has been greatly boosted by the UK government's flagship mortgage financing scheme, after selling around 5,000 new homes through Help to Buy, as visitor levels rise and cancellation rates fall.
Chief Executive Jeff Fairburn said a "good proportion of buyers" are using the scheme which has been criticised for causing a new house price bubble, particularly in London and the south east of England, and making prices more unaffordable, particularly for the first-time buyers it is designed to help most. Of the 5,000 new homes sold, Persimmon said 2,203 were legally completed in 2013.
The first part of the scheme - which is now a year old - makes buyers of newly built homes eligible for a 20% equity loan from the UK government on top of their 5% deposit - it has been extended by four years to 2020. The second phase, which has not been extended, started in the Autumn last year and guarantees a portion of a buyer's mortgage of new and existing homes.
However, the firm said the extension to the scheme provides "welcome support to potential new home purchasers" but more importantly allows housebuilders to "continue to increase the industry's development commitments in support of increasing the number of new homes delivered to the market over the medium term."
Help to Buy has been a welcome boost to housebuilders, which have reported an accelerating recovery in the UK housing market through 2013 and into 2014, particularly in London and the south east. The builders virtually halted new building in the wake of the financial crisis as banks pulled mortgage financing and the ensuing economic crisis put off house buyers. The companies instead focused on paying down debt.
In a trading statement for the period from January 1 to date, Persimmon said it has sold a further 6,000 new homes in Scotland and Wales to customers using similar mortgage products.
Overall the new financial year has started well with visitor levels to its sites up 10% on the prior year during the initial 15 weeks of trading, while cancellation rates are down to 14% compared with 15% a year earlier which Fairburn said showed "good mortgage availability."
Persimmon said weekly private sales rate per site for the first 15 weeks of 2014 was 25% ahead of the previous period, while its current total forward sales for 2014 totalled GBP1.87 billion.
In addition, the company said it has around 7,200 new homes sold forward into the private sale market for 2014 which is 38% ahead of the same point last year, with an average selling price of around GBP200,400 - 3% higher than the corresponding period.
Persimmon said it currently has around 395 active sites across the UK, while it has opened 75 of the 90 new outlets targeted for the first-half of 2014.
Looking ahead, the company said it will focus on "exercising capital discipline through the cycle whilst growing the business as market conditions allow," which includes returning around GBP1.9 bullion of surplus capital to shareholders over the period to 2021.
Recently the firm said it signed a GBP300 million revolving credit facility with five of its relationship banks. The new facility has been extended to a maturity date of March 31, 2019.
Persimmon last traded at 1,265.00 pence per share.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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