Housebuilding giant Persimmon has seen its annual profits plunge by more than half, and warns 2024 will be another tough year.
The company behind Charles Church saw its pre-tax profits fall drastically to £351.8 million in 2023 from £730.7 million the year before.
The number of new homes completed dropped by a third to 9,922 from 14,868 in 2022.
Persimmon predicts the housing market will continue to be “remain subdued” and “challenging” in 2024 with no sign of recovery ahead of the general election and interest rates remaining at their highest since the 2008 financial crisis.
However, the company noted a slight rise in demand at the start of 2024 as mortgage costs eased, causing its weekly net private sales rate per outlet to increase to 0.59 from 0.54 a year ago.
Despite this, the firm disclosed it’s using incentives to spike demand, like part-exchange deals.
The group’s shares took a 4% dip in Tuesday morning trading.
Persimmon said: “With interest rates expected to remain at current levels and a general election on the horizon, market conditions are expected to remain subdued throughout 2024.”
Roger Devlin, the Chairman, commented: “While demand remains high, affordability and mortgage availability has been difficult for many of our customers, especially first-time buyers.”
He added: “Thankfully, there has been some stabilisation in recent months with mortgage rates having fallen from their peak in July 2023.”
Persimmon boss Dean Finch said: “While 2024 will not be an easy year, I remain very confident of the exciting long-term prospects for the group.”
Private market house prices rose five percent to £285,774 in 2023.
But the group revealed that, on an underlying basis, home sale prices came under pressure as an 8%-9% rise in build costs and the use of incentives offset increases.
The group said build costs have eased back to around three percent to five percent in 2024.
It is expecting to deliver between 10,000 and 10,500 homes this year, at an average selling price of £280,000 down two percent on 2023 values.
Persimmon said: “Enhanced competition in the mortgage market and wage growth have contributed to improved affordability albeit it continues to be constrained, particularly for first-time buyers, and demand for homes remains varied across the country.”
“Trading in the southern and eastern counties remains more challenging with weaker pricing, offset by a more robust trading performance in the northern regions.”
