"Affordability and mortgage product availability still remain the key issues"
Persimmon, one of the UK’s largest housebuilders, has warned that its new home sales could fall by as much as 47% this year, citing higher mortgage rates and reduced affordability as the main reasons for the slump in demand for new homes.
The company said that should current market trends continue for the rest of the year, it would only be able to sell between 8,000 and 9,000 homes in 2023 – a far cry from the almost 15,000 homes sold last year.
Persimmon’s shares fell 8.5% early Wednesday morning, even though the housebuilder reported an increase in its weekly private net sales to 0.52 in the first eight weeks of the year, compared with 0.3 in the final quarter of 2022.
However, as early as November last year, two of the UK’s biggest housebuilders – one of which was Persimmon – admitted that they were reviewing business operations amid falling demand due to high rates and soaring inflation.
“The key current challenges are affordability and mortgage product availability,” Dean Finch (pictured), chief executive at Persimmon, was quoted as saying in a Bloomberg report. “While there has been some recent easing in mortgage rates from their high at the end of last year, the majority of respected forecasters do not expect them to return quickly to the levels seen during the previous cycle.”
The company added that the end of the Help to Buy scheme has meant that first-time buyers would no longer have the government support that they need to be able to get on to the property ladder, adding further to affordability challenges.
“There have been some encouraging signs in the mortgage market recently, with rates reducing compared to late last year,” Finch said. “However, affordability and mortgage product availability still remain the key issues, with particular challenges in the south of England.”
Similar to this sentiment, Nationwide Building Society earlier stated that the rise in the cost of servicing the typical mortgage due to the increase in mortgage rates had a considerable impact on housing affordability for potential buyers over the past year.
Its latest house price index, published on Wednesday, showed annual house price growth falling to its weakest level since November 2012.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter.
