PERSIMMON has underlined its confidence in the Scottish house building market, declaring that the Bank of England’s decision to cut interest rates after the Brexit vote will ensure that competitive mortgage deals will continue to be available to home buyers north of the Border.
The house builder, which operates three trading companies in Scotland, admitted the result of the EU referendum on June 23 had “added uncertainty to the economic outlook”.
However, unveiling a 29 per cent hike in pre-tax profits to £352.3 million in the six months to June 30, Persimmon said visitor numbers to its sites had remained “robust” since the referendum and are currently up 20 per cent year on year. It also reported that, since July 1, its private sale reservation rate has been running 17 per cent ahead of the same stage last year.
Mike Killoran, the company’s chief financial officer, said the cut in the Bank of England base rate to 0.25 per cent had reinforce the underlying strength of the housing market.
Mr Killoran said: “There is a broad level of confidence in the market. You scratch your head and think “why is this?” But the man in the street if you will, the normal working family, have decisions to take on a weekly [and] daily basis. I think with the monetary policy reset through the Bank of England the other day, mortgage rates have become even more competitive.
“That gives families arguably a bit more access to the market.”
“There’s a good deal of confidence in the market which is coming through in visitor levels and sales rates. It is most encouraging.”
Asked whether that confidence was reflected in Scotland, Mr Killoran said: “It is. Scotland is a very important market for us. We’re very keen on Scotland in so far as we have opened up a new business – North Scotland – based in Perth. We’ve now got three business in Scotland, to take a bit of heat off the East and West businesses.”
He added: “Scotland has been a sound, solid market for us.”
Shares in Persimmon climbed by more than four per cent yesterday as investors brushed off concern over the long-term economic outlook and signalled their enthusiasm for its “robust” half-year showing.
The housebuilder reported a 12 per cent rise in first half revenues to £1.49 billion, with legal completions jumping by six per cent to 7,238 new homes – meaning it delivered an additional 383 new homes compared with the first half of 2015.
Mr Killoran put the average selling price achieved by the company at £189,000 in Scotland – compared with £205,762 across the group as a whole – revealing that it was active on numerous sites across the country.
The company, which is largely focused on the two-storey family home market, is currently building homes in Johnstone and Cambuslang in the west, and Dunbar and Silverfield in the east. Its exposure to the market in Aberdeen, where the local economy has been affected by the downturn in the oil and gas sector, is limited, Mr Killoran said.
Persimmon said it secured 7,108 plots of new land in the period, taking its consented land bank to 93,519 plots.
Asked whether the company’s plans to invest in land for building had been affected by the Brexit vote, Mr Killoran said: “You are naturally a bit more cautious, but it is important to note we are still seeing a good confident market from a south perspective. You do have to think about what circumstances may arrive further out, so we are being very vigilant to any changes in the market.
“We’re being a bit more demanding in terms of the terms and conditions that we buy land on, because of the increase in risk profile. We are just being that but more cautious to allow us to learn about how the market is responding to changed circumstance.”
George Salmon, equity analyst at Hargreaves Lansdown, said: “With analysts already confident that Persimmon would report strong numbers for the first half, all eyes were on what the group would say about trading since the EU referendum. With cancellation rates actually declining, and sales rates and visitor numbers up strongly, Persimmon at least look to remain in rude health at present.”
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