UK: Housebuilding Persimmon reports boost from Help to Buy scheme
- Credit: Archant
Housebuilder Persimmon said today that it had seen reservations of new homes surge 30% since the launch of a Government scheme allowing people to buy properties with a 5% deposit.
Persimmon, which also owns the Charles Church and Westbury Partnerships brands, said buyers had reserved 1,124 of its homes through the Help to Buy scheme since its launch in April, bringing “additional momentum” to the traditionally busy spring period.
The York-based group, which currently has around a dozen developments in East Anglia, said home sales increased 7% during the first half of the year to 5,022, from 4,712 a year earlier.
Visitor numbers were up 13% and total revenues surged 12% to about £900million. Its forward sales are 19% ahead of last year at £920m.
Profit margins have soared to 15% a year-and-a-half ahead of target, while it has also sold out a number of developments sooner than expected.
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Chancellor George Osborne unveiled Help to Buy in March, which lends buyers 20% of the value of a new home worth up to £600,000, interest-free for five years.
This allows people to buy a property with a 25% deposit and together with another state stimulus programme, the Funding for Lending Scheme (FLS), has been credited with spurring a recovery in the housing market.
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The FLS incentivises banks and building societies to lend more by offering them discounted loans.
Figures from the Bank of England on Monday showed mortgage approvals soared to their highest level in three-and-a-half years in May, with 58,242 mortgage approvals for house purchases. That was up from 54,354 in April and the highest level since December 2009.
Persimmon said: “Throughout the period there has been an improvement in the availability of mortgage credit and a gradual reduction in mortgage interest costs supported by the Government’s Funding for Lending Scheme.”
The average price of a Persimmon home increased 5% on a year earlier to £179,200, mainly due to building more family homes.
Underlying operating profit margins increased to about 15% from 12.1% a year earlier, ahead of its December 2014 target for 15% to 17% profit margins.
Persimmon is returning £1.9billion to shareholders over the next decade, and paid the first £228m tranche in June.
But despite rising demand Persimmon plans to keep its active sales outlets stable at 385 for the rest of the year, by opening another 85 new sites.
Persimmon, whose current developments include sites in Ipswich, Hadleigh, Colchester and Braintree, plus Charles Church sites in Ipswich and Bures, said market conditions remain stable as it enters the slower summer selling period, but consumer confidence is fragile.
It bought another 7,300 plots during the six months, taking its land bank to 70,500 plots with planning permission.
Shares in the builder have more than doubled over the past year, propelling it into the FTSE 100 Index.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “As expected, the Government’s newly-introduced Help to Buy scheme has added further fuel to already historically low interest rates.
“In all, and hugely underpinned by Government and Bank of England initiatives, Persimmon and the housebuilding industry continue to make progress.
“With a following wind clearly evident, analyst opinion continues to denote a buy.”