Housebuilder Persimmon completed the sale 14,868 new homes in 2022 shaking off the cost-of-living crisis, but see their sales rate deteriorating significantly in 2023.
Home sales were at the top end of expectations in 2022 and the builder pushed on with a higher build rate of 276 units per week than 2021’s 255 per week.
However, the company are now seeing falling sales rates as the impact of higher interest rates and soaring mortgage rates curtail demand for new homes.
Persimmon said forward sales were down 36% to £1bn and private forward sales were down 56% to £0.5bn.
“Persimmon have followed in the footsteps of rival housebuilder Barratt, warning of a material slowdown in demand over the fourth quarter as consumers battle higher mortgage costs. This fed through to lower sales rates, higher cancellations, and a hefty drop in forward orders. Though, it must be said, a lot of that was largely expected,” said Matt Britzman, Equity Analyst at Hargreaves Lansdown.
The visibility of falling sales meant the declines have been largely priced into Persimmon shares throughout 2022 when the stock lost more than half of its value. On Thursday, Persimmon shares jumped 6% on confirmation declining sales were better than the worst case scenarios.
Rising housing prices helped offset building cost inflation but inflationary pressures are expected to cap margins through 2023. Analysts at Third Bridge highlighted the difficulties in the labour market that are likely to persist for the foreseeable future.
“Getting enough trained staff on site is getting harder thanks to an exodus of foreign workers and a lack of interest in the construction industry from the younger generation,” said Zainab Atiyyah, Analyst at Third Bridge.