Housebuilder Persimmon said today that it had revised the value of its property portfolio upwards for the first time since the housing market went pear-shaped. This unexpected boost of £28m (in the first half of the year) was enough to push Persimmon into the black – and appears to confirm the recent signs from the sector that the market is stabilising again. But although official figures out today reveal that mortgage approvals have inched up again (for the seventh month in a row), the worry is that difficulties in getting finance (plus rising unemployment) could make this rally short-lived…
In truth, this rise in values helped put a positive spin on what would otherwise have been a fairly gruesome set of figures from Persimmon: its pre-tax profits in the first half of 2009 slumped 74% to £10m, so without the value adjustment it would have been well and truly in the red. It sold 27% fewer houses than in the same period last year, with the average selling price down 14% - which meant that total sales were down nearly 40% year-on-year. Not exactly a surprise, but still pretty grim.
On the other hand, things do seem to have picked up lately. Persimmon said recent visitor numbers were actually up on last year, while forward sales are also running ahead of last year’s total at about £910m – chairman John White said prices have stabilised lately ‘in most parts of mainland UK’, and the average price of advance sales is actually higher than last year (although that’s partly because it’s selling fewer cheap homes to housing associations, which might create problems of its own in the future). As a result, it’s been generating plenty of cash, allowing it to reduce its net burden from £900m last year to less than £400m by the end of 2009. That’s the kind of news investors love (particularly given the amount of wrangling it required to renegotiate its loan terms earlier this year).
The big worry for housebuilders like Persimmon and Bovis, as you’d expect, is that limited mortgage availability is likely to curtail any housing recovery. And although official figures out today from the British Bankers Association show that July mortgage approvals hit a 17-month high of 38,181 (a 77% jump on this time last year), they’re clearly right to be concerned. This figure is still very low, in historical terms, and the BBA admits that banks are being a lot more picky about who they lend money to. You can’t blame them for that, since it was their failure to do so in the past that got them into bother – but it’s not going to help Persimmon and co bounce back from their annus horribilis...
In today's bulletin:
Summer sucker Punch
Persimmon boost as housing market recovery continues
Stricken bankers-turned-entrepreneurs rescue Regus?
Managing a recruitment business through the recession
FDs want to scrap your perks