6th Nov 2013 13:34
LONDON (Alliance News) - LONDON (Alliance News) - Housebuilder Persimmon PLC Wednesday said sales activity has improved further since its half-year results, with visitors levels up 20% on last year boosted by the UK government's mortgaging financing scheme.
In August, the company posted a 38% increase in pretax profit in the half year ended June 30, as weekly private-sale reservation rates rose 30% compared with 2012 following the introduction of the UK's Help To Buy scheme in April.
Help-to-Buy is a programme whereby the UK government either provides part of the mortgage loan to buyers of new-build homes or guarantees part of the borrower's mortgage, allowing them to get a bank loan with a lower deposit than would be normally required.
Persimmon says interest has not waned in the three months ended September 30, and cancellation rates have continued to run at historically low levels at around 16% compared with 20% in 2012.
"Help to Buy is helping create confidence in the market place," Chief Executive Jeff Fairburn said in a telephone interview. "It has demonstrated to people that there is affordability when they are buying a new house, and of the 3,000 homes we've sold under the scheme the vast majority has been to first time buyers."
Fairburn said the firm was pleased that the second stage of the scheme, covering resales of existing homes, was brought forward as it "showed homeowners they have a better chance of selling their property so they can buy new [build]" homes, such as those sold by Persimmon.
The company said it is now fully sold up for the current year with GBP650 million in forward sales reserved beyond 2013, compared with GBP462 million a year earlier - an increase of 41%.
In response to the improvement in sales, the company said it has increased its build rates across the country.
Earlier this year rival housebuilder Redrow reported a shortage of bricks and construction workers as the property market started to pick up. However Fairburn said Persimmon was managing to meet the increase in demand, although there had been times when it had been "squeezed" by a lack of resources.
As part of a strategy to open 85 new sites identified for the second half of the year, Persimmon has now opened 65 of these with "encouraging reservation rates". It said this would support further expansion in the future as it converts reservations into legal completions.
However, Fairburn said there are still planning issues that needed to be resolved, despite attempts by government to reduce red tape. Last month, the government said it would scrap unnecessary regulation which adds to the cost of providing new houses and commercial buildings.
"The red tape challenge is very welcome", Fairburn said. "I think some of the various localised housing standards that differ from one local authority to another does, however, cause many issues for the industry and there is no need for it. We can have national standards, and I think that would make it much easier and straightforward to provide new housing."
Persimmon said selling prices in all its regional markets remain firm. Earlier this year, it said the average selling price of new homes it sold was GBP179,199. The company said it was alert to concerns that house prices could rise to an unaffordable level and would not take advantage of recovery in the market by increasing its prices unnecessarily and instead maintain affordability.
"In some places we have seen prices move further ahead of others, but our model is not based on price inflation, which is good for the housing market in the medium term," Fairburn said.
Persimmon said operating profits during the period continue to improve with "tight control exercised over build costs and overheads".
Fairburn said the company's performance meant it was able to continue to return cash to shareholders under its capital return plan. He said an increase in sales would allow the business to grow and develop meaning it would be able to return cash "more quickly" to shareholders.
The stock was trading at 1,199.00 pence, down 1.2%.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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