The UK’s largest new home builder has reported revenues of £1.84 billion for the first six months of 2021, higher than the record revenues the company announced before the pandemic.
Soaring house prices have continued to support developers as the stamp duty holiday nears its scheduled end in October. Some mortgage lenders have suggested a dip in house prices towards the end of June, but the government’s own data suggests that house prices have risen an average 8.9% over the last year.
Demand varies from area to area but some places have experienced even higher increases, as people seek more spacious properties and space to work from home.
Persimmon’s previous record earnings period was the first six months of 2019, when it announced revenues of £1.75 billion. Sales then ‘flagged’ for the home builder, to £1.2 billion during the first half of 2020.
Among the reasons for the increase in fortunes for new housebuilders has been the government’s stamp duty holiday, that was introduced to help support the industry during the pandemic in 2020. At the time of its introduction, it was feared that house prices would plummet, potentially echoing the problems encountered during the financial crisis ten years previously, when many new home owners found themselves owning properties in negative equity.
Persimmon is among a number of house builders that have cashed in on government support schemes over the years, including Help to Buy, under which Persimmon sold half of the 16,000 properties it built in 2018, when it became the UK’s most profitable home builder with a record £1 billion in profits. Former Chief Executive, Jeff Fairburn, left Persimmon later that year, following reports of a £75 million pay award.
The average price of a Persimmon house has risen 4.9% over the first six months of 2021. The number of sales increased to 7,406 during the period, up from 4,900 in 2020 and similar in number to house sales in 2019.
In its stock market statement, Persimmon said: “House price growth is mitigating the effect of the upwards pressure being experienced on the industry’s cost base” and that homes were selling 20% faster than they did in 2019. Redrow and Vistry Group, home builders much smaller than Persimmon, confirm that their homes have also been selling much faster than two years ago.
Come the final end of the stamp duty cut in, some property experts expect house prices to fall somewhat sharply. Housebuilders, though, are confident that the relatively short supply of houses will continue to further buoy demand.
Persimmon’s cash position has grown from £800 million in 2020 to £1.3 billion at the end of June 2021.
Just as well, as Persimmon has had to set aside £75 million to pay for costs involved in replacing potentially flammable cladding systems on its properties. The competition regulator has also expressed ‘troubling evidence’ that the company, along with other housebuilders, has knowingly overcharged and misled its leasehold customers and prospective buyers.