Britain’s biggest housebuilder Persimmon said it was trading well and sticking to plans to return cash to shareholders despite fears about the property sector following the vote to leave the EU. The York-based company said a few potential customers canceled viewings straight after the referendum result was announced on 24 June, but that business was back to normal.
In a trading update, Persimmon said it was too soon to judge the effect of the referendum vote on the market but that demand for houses and low-interest rates would probably keep business buoyant. In the first six months of 2016, Persimmon sold 7,238 new homes – up 6% on a year earlier – at an average price of £205,500, also up 6%. Revenues increased 12% to £1.49bn. Jeff Fairburn, Persimmon’s chief executive, said: “The first half trading has been good. We’ve been pushing hard through that period to the end of June to get increasing volumes and the increase in the selling price. Forward sales are good, and we have got some good new sites to start. Analysis Construction becomes the first casualty of Brexit as housebuilders get jitters.
Phillip Inman, economics correspondent
Since Britain voted to leave the EU, Persimmon’s shares have lost a third of their value, along with other housebuilders and property-related companies. Investors fear a post-Brexit economic slowdown will damage consumer confidence and push up unemployment, causing people to scrap house purchases.
The company said it would continue to pay out extra dividends as planned, returning almost £2.8bn, or £9 a share, to investors by 2021. But Persimmon’s shares fell 5% to £13.62, among the worst performers in the FTSE 100 indexes.
Fairburn said: “It’s [the share price] disappointing, but we are just focused on trading. We will deal with what we see on the ground. So far, so good. It’s a little more than a week since the vote, and we have seen good levels of interest on-site, and we had a good trading week last week.
“People are obviously asking about what happens now, but it’s too early to say. We saw a few more cancellations, but that was an immediate reaction, and it’s settled down to more normal levels.”
Concerns intensified on Monday when a survey showed a sharp slowdown in construction activity in the runup to the referendum, and Standard Life stopped withdrawals from a £2.9bn property fund as investors rushed for the exit.
Laith Khalaf, an analyst at Hargreaves Lansdown, said: “You wouldn’t guess from Persimmon’s results that the company has lost around a third of its value in the last fortnight. That’s because the stock market is looking forward to the next six months and beyond, and the Brexit vote is casting a long shadow over the UK housebuilding sector.”
UK construction industry slumped dramatically in the run-up to the EU vote
Uncertainty over the referendum prompted the biggest fall in the number of people trying to buy a property since the financial crisis. According to the Royal Institution of Chartered Surveyors (Rics), the chancellor predicted house prices could fall up to 18% if Britain voted to leave.
On the Rics survey, Fairburn said: “We haven’t seen that. We are selling to first-time buyers in the domestic marketplace. Affordability levels are good, and we don’t sell to investors, and we’re not in London.
“There is no reason we can see why people shouldn’t be confident at the moment given the position that they see. A call on house prices is down to an individual view, and we do not see any indication of that.”
Forterra, a brickmaker, said it would mothball two factories in Lancashire on Tuesday because it had enough supplies to meet demand.
“Given current economic uncertainty and sufficient brick inventory levels, the board has reviewed the current production plan and has decided to maximize the utilization of our most efficient brick plants and effectively manage our cost base,” the company said.