House-builder Persimmon has given another boost to the property market by saying sales rates had continued to improve.
The Charles Church firm, which has offices in Studley and Wolverhampton, said volumes were consistently ahead of last year, with the rate of decline in prices also showing signs of stabilisation.
Persimmon pointed to historically low levels of cancellations, which it said was another indicator of an improved housing market, and the announcement boosted share prices in building companies yesterday.
The company added in a trading update: “We are encouraged by the improvement in sales rates when compared to last year, but will remain cautious until mortgage availability improves further and employment prospects stabilise.”
Persimmon is the company behind the Abode Birmingham development on Charlotte Road, Edgbaston, the Windsor Heights project in Redditch and has been involved in the Pype Hayes Regeneration project. It said it would continue to focus on cash generation and the reduction of its debt pile, which it has reduced to £495 million at the end of June from £906 million 12 months earlier.
During the six months to June 30, Persimmon legally completed 4,006 homes and generated revenues of around £625 million, down from £998 million in June 2008 after the group experienced a four per cent fall in prices.
“The rate of decline has however reduced and our recent experience is that prices are now stabilising in some locations,” Persimmon added.
The company has seen its shares recover from their lows late last year – they have doubled in price since December.
But they are still trading at less than half of their peak value in early 2008.
The severe downturn in the housing market last year led Persimmon to focus on keeping costs to a minimum and conserving cash.
It said it continued to monitor work in progress levels very closely, but during the first half it opened 45 new developments and plans to commence work on a further 50 sites during the second half.
The company has around 390 sales outlets, compared with 420 in January. Forward sales revenues at the start of the second half of the year were £700 million, against £458 million at January 1.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said the statement raised hopes that the worst for the sector may be over.
“Sales remain ahead of those seen in 2008, with the pace of recovery improving in recent weeks. Furthermore, some signs of price stabilisation have been detected, while the group’s goal of reducing debt is running ahead of schedule.”
