Persimmon sales rose above pre-pandemic levels in the first half of 2021, as tax cuts and booming British house prices continued to benefit housebuilders.
The UK’s largest housebuilder said on Thursday that revenues reached £1.84bn in the first six months of 2021, outstripping the £1.75bn recorded in the same period of 2019. Persimmon’s sales had dropped to £1.2bn during the first half of 2020.
The housing industry had feared financial difficulties in 2020 when home sales were temporarily blocked during the UK’s first national lockdowns. However, the government quickly stepped in to prevent house prices falling, announcing an emergency cut in stamp duty.
The tax cuts prompted a boom in house prices, with demand in some areas also boosted by people looking for more space to work from home. Government data suggest that UK average house prices increased by 8.9% over the year to April 2021, although more recent figures from Halifax, a mortgage lender, suggested that prices may have dipped in June as some of the stamp duty cuts expired.
The average price of houses sold by Persimmon was £258,200, 4.9% higher in the first half of 2021 than in 2020. It completed sales of 7,406 houses during the half, up from 4,900 in 2020 and just short of the 7,584 completed in 2019.
“House price growth is mitigating the effect of the upwards pressure being experienced on the industry’s cost base,” Persimmon said in its statement to the stock market. It also said that it was selling houses 20% faster than in 2019.
The stamp duty cut is due to end completely from 1 October, and some analysts expect prices to fall relatively steeply at the end of the year. Yet with houses in short supply, housebuilders have expressed confidence in continued demand. Smaller housebuilders Redrow and Vistry Group both said on Wednesday they were selling homes quicker than in the previous two years.
Persimmon said: “UK housing market fundamentals remain supportive with low interest rates, improving levels of mortgage availability, ongoing government support and strong customer demand.”
The strong market has allowed Persimmon to brush off difficulties, such as the announcement last month by the UK’s competition regulator that it had found “troubling evidence” that leasehold homeowners and prospective buyers were overcharged and misled by the company, among others. In February it also had to set aside £75m to pay to replace potentially flammable cladding.
The sales have allowed Persimmon to dramatically grow its cash pile. It had net cash of £1.3bn on 30 June, up from £800m at the same point in 2020. That allowed it to accelerate its dividend payment. Persimmon will pay out 110p a share in one go in August, rather than splitting it over two payments in August and December.
Dean Finch, Persimmon’s chief executive, said he was pleased that the company was building homes at the rates achieved before the pandemic, in spite of safety restrictions.
“Persimmon performed well during the first half of the year delivering new home sales completions approaching the levels achieved in the first half of 2019,” he said.
“Customer demand for our new homes has been strong right across the UK with healthy sales reservation rates through the period.”