Persimmon’s results will help reveal the foundations of the UK property market © PA
It’s almost becoming boring. Housebuilder Persimmon has just announced another increase in half-year revenue (up 12 per cent), average selling price (up 4 per cent), operating margin (up 380 basis points) and interim pre-tax profit (up 30 per cent).
This puts it on track for a sixth consecutive annual rise in all four measures (possibly more than a sixth but even Lombard got bored after the 2012 numbers). Persimmon shares rose on the news (by 3 per cent), further extending their gains (to 44 per cent in a year, or 273 per cent in five).
So, in the interests of waking drowsy readers, warning nervous investors, and cheering jealous non-shareholders, the column now offers an assessment of what might finally reverse the trend.
c Falling demand. Persimmon’s sales rate since July is up only 2 per cent — a slowdown on the 7 per cent in the first half. But that is still strong for slower summer months. And the order book up 15 per cent. Probability: 5 per cent.
c Falling house prices. Property website Rightmove says asking prices are down 0.9 per cent month-on-month, with London leading the decline. But Persimmon’s lack of South-East England bias means it only asks £213,262 on average — and these prices “remained firm”. Probability: 15 per cent.
c Higher land prices. Persimmon says it is now “cautious” about land investment given Brexit-induced uncertainty. But it still has loads of cheap land and could afford to replace 1.2 times the plots it built on, taking its total to 98,712. It only used 7,794 in the half. Probability: 10 per cent.
c Skilled Labour shortages. Persimmon’s non-London focus makes it much less reliant on migrant labour than rivals. Probability: 5 per cent
c Higher material costs/lower margins. It is the only listed housebuilder with its own timber frame making unit, and a dedicated brickworks opening in the second half. Probability: 0 per cent.
c Higher mortgage rates. With inflation easing in June, Bank of England policymakers last voted 6-2 against a rate rise and Persimmon says a competitive mortgage market drives its sales. Probability: 10 per cent.
c Withdrawal of government Help to Buy incentives. Ministers are reviewing the future of subsidised loan and savings schemes after 2021. But with a tiny majority and even Labour leader Jeremy Corbyn pledging to help first-time buyers until 2027, it would take a brave politician. Probability: 20 per cent.
c Planning delays. Persimmon has struggled to increase the number of plots with implementable planning permission and Whitehall policy stasis doesn’t help. Probability: 15 per cent.
c Asteroid strike. A three-mile wide asteroid will miss the earth next week, but Nasa has cut the odds of a strike this century. Probability: 0.001 per cent.
c Donald Trump. Were the president to mistype the first letters of Pyongyang as Powys, he might inadvertently bring fire and fury to a range of 2-bed houses from £154,995. Probability: 0.01 per cent.
c Failure to return more of its £1.1bn cash to shareholders. Ah, now, where’s that calculator . . .