Persimmon said the end of the Help to Buy scheme held back sales, particularly in the south Andrew Milligan/PA)
(Picture: PA Archive)A slump in sales at Persimmon revealed the extent of the slowdown in the housing market today, as rising interest rates and mortgage costs deterred buyers from signing up for new homes.
The FTSE 100 housebuilder estimated the monthly cash cost of mortgage payments for some first time buyers has “approximately doubled over the past year” and that the impact was worsened by “limited availability of high loan to value mortgages.”
Private forward sales slumped by over a half – down 56% to £500 million in 2022 – and that it was “too early” to predict when demand would recover. The slowdown was sharpest in the south, especially in areas where the government’s Help to Buy scheme was popular. It closed to new applicants at the end of October.
Oli Creasey, equity research analyst at Quilter Cheviot, said Persimmon highlighted the “precarious nature of the UK housing market”, where “demand, or more specifically affordability, appears to have fallen off a cliff.”
He added: “All eyes will be on to what extent there is a recovery in volumes early in 2023. Mortgage pricing and availability appears to be improving slightly, and housebuilders may be willing to negotiate on price.”
Pressure grew in the second half of the year, with Persimmon pointing to “concerns over the economy, mortgage rates and the cost of living”, which “weighed heavily on consumer confidence.” It did not specifically mention the “mini”-Budget in September, which upended expectations for interest rates and led to a record number of fixed-rate mortgage deals being pulled by lenders.
But Dean Finch, chief executive, said the slowdown got worse. “This change in market conditions gathered pace in the fourth quarter and is reflected in the reduction in our recent weekly sales rates and a lower forward sales position.”
Nonetheless, average private selling price hit £272,200, up 5%, with house price inflation running ahead of increases in building costs. The average selling price of housing association homes was up 8% to £142,000. Persimmon completed almost 15,000 homes in the year, up 2% and at the top end of its forecast range.
