Persimmon sees sustainable homes growth

Persimmon, one of the UK's biggest housebuilding groups, forecast no return to the unsustainable boom of the 1980s as the strong housing market in the South-east ripples out across the UK.

The group said areas of the country south of Leicester had picked up over the past 12 months, with inner London very buoyant, and this strength had started to spread out into the north of England and Scotland.

New house prices were rising at around 5 to 7 per cent in the South and around 3 per cent in the North, according to John White, chief executive. He described this as "sustainable, steady progress" quite unlike the boom of the 1980s.

Although numbers of visitors through the company's show houses had not gone up, he said the quality of the purchasers had improved, with a higher level of conversions and an increased ability to complete quickly, involving fewer part-exchange contracts.

Persimmon revealed that completions and reservations for the year to date are already up 10 per cent at 5,963 units.

Duncan Davidson, chairman, said concerns ahead of the election and the Budget had almost all evaporated. "Without wanting to be too complacent, we are optimistic on the back of the political situation since the Budget, and the Government does seem to recognise that the private house market is very important to a lot of people."

However, there was a warning that the increased demand had pushed up labour rates for bricklayers and the like by as much as 10 per cent in some areas over the past six months.

Persimmon's general confidence emerged as it reported a 110 per cent rise in pre-tax profits to pounds 23.3m for the six months to June, boosted by the pounds 177m purchase of Ideal Homes from Trafalgar House last year. The company said it could not split out the contribution from Ideal, whose rationalisation led to pounds 3.1m of exceptional costs in the previous period, but put the underlying rise in sales - which were up from pounds 203m to pounds 256m - at 10 per cent. The half-way dividend is being hoisted 6.7 per cent to 3.2p.

Persimmon sold 3,194 houses in the period, 18 per cent more than in the first half of 1996, at an average price which rose from pounds 75,000 to just short of pounds 80,000. Forward sales to be completed in the second half are currently being made at an average of pounds 83,000 and brokers expect total completions for the year to reach 6,600.

Mr Davidson refused to comment on whether he was interested in Fairclough Homes, but said the company was still looking for more acquisitions. He did say that existing operations were likely to be expanded in Scotland, the West Midlands and Kent.