Persimmon joins the housing market bulls

Profits down again but housebuilder revalues assets upwards
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Britain's biggest housebuilder, Persimmon, has written up the value of its land bank, adding to signs that the property market is finally stabilising.

Despite half-year results recording pre-tax profits down 73 per cent at £9.8m on revenues down 39 per cent to £612m, the group booked a £27.9m rise in the value of its land, leaving its holdings with an estimated value of £1.7bn.

Last year Persimmon wrote down its land bank to the tune of £652m as mortgage approvals dried up, consumer confidence sank and the housing market all but ground to a halt.

But both sales and prices are starting to pick up. Persimmon sold just more than 4,000 houses in the first six months, and since July reservations for sales have risen 9 per cent above last year's levels to £910m.

Average selling prices are also rising, hitting £174,000 in recent weeks, up 6 per cent from the £163,650 average at the same time last year, which Persimmon puts down to rising sales of houses, in favour of flats, and less business with housing associations. Over the first half, the average selling price was £155,524, some 14 per lower than last year's £181,485 average.

John White, the Persimmon chairman, said: "We expect sales rates to remain resilient due to the successful de-stocking that has occurred in the industry combined with the continuing good levels of underlying demand for new homes in the UK."

Notwithstanding the hints of green shoots, any optimism remains tentative at this stage and Persimmon is not paying an interim dividend. "Recently, selling prices have stabilised in most parts of mainland UK. Future volume increases and price movements will be dependent upon mortgage availability, job prospects and the health of the general economy," Mr White said.

"Mortgage availability continues to be a concern. However, the overall situation in respect of the mortgage market and valuations has recently shown signs of improvement."

By running down its inventories and cutting work-in-progress, Persimmon brought in £152.8m in cash in the first half. The group is now targeting debts down to £400m by the end of year, some £50m lower than its previous target and less than half last year's level.

Last year's restructuring has cut the company's operating expenses by around £6.5m per month, enough to generate savings of more than £50m per year compared with its running costs at the end of 2007.

Earlier this week, smaller rival Bovis said it was on the hunt for land to buy despite a pre-tax loss of £8.6m and an 18 per cent hit to revenues.

Mortgage approvals: Stabilising at last?

Mortgage approvals from major high street banks rose to the highest level since February 2008 last month, but the gross value is still down by 39 per cent year on year. Some 38,181 mortgages were agreed last month, 7.4 per cent more than in June and 77 per cent up on July 2008, the British Bankers' Association said yesterday. On average, home buyers are borrowing £139,700, 1 per cent more than the same month of 2008, pushing the UK's total mortgage lending up by £1.6bn in July. But although £5.2bn-worth of house purchase loans were approved last month, up 79 per cent on the year before, gross mortgage lending stood at £8.4bn, 39 per cent down. David Dooks, at the BBA, said: "The numbers of mortgages approved each month by the high street banks have continued to recover from last November's low point, but new lending is largely being offset by repayments, so that net rises remain relatively weak."

Sarah Arnott