Housebuilders beat new residence forecasts regardless of financial weak point

The Government’s housebuilding drive was handed a confidence boost on Tuesday after London-listed builders reported building more new homes than expected last year. 

Persimmon and Cairn Homes delivered bumper guidance-beating results for last year on the back of higher homebuilding volumes.

York-based Persimmon finished building 10,664 properties in 2024, a 7 per cent rise on the previous year and ahead of market forecasts.

Growth was driven by private home completions climbing by 18 per cent to 9,075, offsetting a 30 per cent slump in new partnership houses.

The average selling price of a new home also rose by 5 per cent to around £268,500, which Persimmon said partly reflected ‘improving market conditions’.

Britain’s housebuilding sector has experienced challenging times for over two years due to interest rate hikes and consumer weakness.

The Bank of England made fewer base rate cuts than initially expected last year, ultimately reducing just twice to 4.75 per cent, amid fears of an inflationary resurgence. 

Mortgage rates are falling to more affordable levels, though the best rates remain above 4 per cent for the time being.

This has stimulated a recovery in residential prices and transactions.

As a result, Persimmon’s current forward order book stands at £1.15billion, an 8 per cent year-on-year increase.

The FTSE 100 group additionally forecasts its underlying pre-tax profits for 2024 to be at the top end of market expectations.

Dean Finch, chief executive of Persimmon, said the company ‘is well positioned for the future, supported by the land and planning investment we have made in recent years, our vertical integration capabilities and our excellent teams’.

He added: ‘This investment, coupled with the government’s ambitious planning reforms which demand more of the high-quality, affordable homes which are Persimmon’s core strength, supports our growth ambitions in the medium-term.’

Cairn also achieved strong growth last year, exceeding estimates on housebuilding and operating profits.

The Dublin-focused business reported its profits soared by almost a third to about €150million, while its turnover and completed units both expanded by 29 per cent to €860million and 2,243 homes, respectively.

For the coming year, Cairn plans to enlarge investment in its construction activities, which it said will ‘meaningfully increase’ sales to its core first-time buyer market.

‘There remains a limited supply of competitively priced and well located new starter homes, and the supportive economic backdrop continues to drive very positive momentum,’ it told shareholders.

Meanwhile, fellow housebuilder MJ Gleeson said its expected results for the 2025 financial year will surpass the previous 12 months and align with its current market outlook.

The Sheffield-based group sold 801 properties in the six months ending December 2024, 32 more than in the same period the prior year.

However, Crest Nicholson said its adjusted pre-tax profits for the last fiscal year would still likely be at the bottom end of its £22million to £29million guidance range.

It has delayed publishing its 2024 results by a fortnight to 4 February to allow auditors more time to determine the full costs of improving fire safety in its tall buildings.

The Surrey-headquartered firm now estimates its total fire remediation provisions to be around £245million to £255million.

Crest had previously forecast £145million, but this estimate only covered about 45 per cent of affected buildings.

Dozens of housing developers have agreed to spend billions of pounds this decade on fire safety works in large buildings, including removing unsafe cladding.

Despite predicting extra costs, Crest Nicholson shares were 2.4 per cent up at 160.1p on Tuesday morning.

MJ Gleeson shares were 4.2 per cent higher at 461p, while Cairn Homes shares were 1 per cent up at 176.8p, and Persimmon shares were 5.6 per cent up at £11.15.

Charlie Huggins, head of equities at Wealth Club, said: ‘With low single-digit cost inflation expected for housebuilders in 2025, they cannot afford house prices to go into reverse. 

‘But the odds of that happening have increased since the Autumn Budget. This leaves the housing market precariously positioned as we begin the new year.’