Persimmon offers cheer on profits as house prices stabilise

Housebuilder Persimmon has said annual profits will be at the top end of forecasts, but said buyer confidence was vulnerable to uncertainty over interest rate cuts.

The Charles Church group saw shares lift 5% in Tuesday morning trading after it said private market house prices had improved over the year, edging up to around £287,150 from £285,774 a year earlier, with completions also up 7% at 10,664.

It said full-year underlying pre-tax profits are set to come in around the upper end of the £349 million to £390 million range expected in the market.

Chief executive Dean Finch cheered improved market conditions, saying “customer enquiries and sales rates have been consistently ahead of the prior year since the spring selling season”.

But the FTSE 100 firm flagged worries over the outlook for interest rates and the impact on the market.

“We are mindful of evolving macroeconomic and geopolitical uncertainties, including the timing of future interest rate changes, and the effect that they may have on our market and consumer confidence in the short term,” it said.

Economists are pencilling in further interest rate cuts but the timing and pace of reductions is uncertain given that UK inflation is back on the rise and with incoming US President Donald Trump set to impose trade tariffs.

Recent turmoil in UK government bond markets, caused by worries over UK public sector debt levels and stalling growth, is also seen as adding to pressure on mortgage rates.

Persimmon’s more cheery guidance on profits shows signs of a recovery after earnings more than halved in 2023.

It saw pre-tax profits slump to £351.8 million in 2023 from £730.7 million the previous year and had been resorting to incentives to boost demand.

Fellow builder Crest Nicholson revealed on Tuesday that its annual results will be delayed by two weeks until February 4 to give its auditor more time to calculate the total cost of fire safety measures for tall buildings.

It warned that the cost of these measures is expected to rise by up to around £130 million, bringing the total hit for 2024 to about £245 million to £255 million.

The group’s auditor needs to calculate the exact cost to address fire safety issues for all of its 291 tall buildings under the remediation agreement with the Government, which has been put in place following the Grenfell Tower disaster in 2017.

Crest expects its remediation programme to be completed in 2029.

The FTSE 250 firm added that it continues to expect underlying pre-tax profits at the lower end of the £22 million to £29 million previous guidance.