Property: Persimmon Says Market is Stable

The Property Market is Stable

The Property Market is Stable

According to the house builder, Persimmon, the housing market is stable at the moment but still “challenging”. The company says that thought the weak economic growth means the market will be difficult, it is still financially stable.

The company sold 4,439 properties in the first half f 2011, 5% less than 2010. Additionally, the average selling price was 4% lower than 2010, at £162,647.

The profits of the company before tax were £40.5 million, down from last year’s amount by 41%. This is partially due to an increase in how much the company claimed its land was worth last year, as a one off increase.

Changing “Capital Structure”

Persimmon reversed a previous change in land values of £70.7 million in the first six months of 2010 as well. In order to omit the increase from that change, which was 52% higher than the previous year, the company claimed an underlying profit of £59.7 million.

The chairman of the company, Nicholas Wrigley, said, “The significant improvement in underlying profitability of the business has resulted from the combination of gross margin gains and a more efficient capital structure.”

Shares were increased from 3p to 4p per share in order to increase its half-year dividend.

Market Issues

Despite all of this, the company has maintained that the markets are stable. The housing market has seen huge increase in major metropolitan areas such as London, which has seen an increase in both the rental market and in property sales, bucking the trend nationwide.

The mortgage industry is also suffering, with first-time buyers finding it much more difficult to get a mortgage. Deposits are larger than most people can afford to save for, but interest rates remain low, meaning those who have mortgages can pay them back easily, but those who do not have them have trouble saving to get one.

Deposits are also larger than ever on the rental front, as monthly rents have increased nationwide as well. With these higher prices, first-time buyers have even more difficulty saving. Without an increase in first-time buyers, the market will not reach the levels it was before the recession. However, hope is present in the news from Persimmon that it is stable.

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