Persimmon Sees Signs of Build Cost Inflation In Negotiations For 2025

Leading UK homebuilder Persimmon (LON: PSN) reported positive trading momentum in the period since July 1, 2024, but noted some signs of build cost inflation.

The company revealed on Wednesday that it remains on track to deliver growth in completions to approximately 10,500 for the full year.

Visitor numbers and queries are said to remain robust, with sales rates significantly ahead of the previous year. The company said the forward order book has increased by 17% year-on-year, with the private average selling price remaining strong.

The company delivered 1,416 homes in the third quarter, including a 3% increase in private homes. This was slightly below the 1,439 delivered during the same period last year.

Persimmon states that the initial reduction in interest rates and increased availability of high loan-to-value mortgages have positively impacted affordability, particularly for first-time buyers.

Overall pricing is said to have held firm, with incentives remaining around 4-5% on average. The private forward sales position has increased by 40%, reflecting more stable market conditions.

Persimmon remains optimistic about its growth prospects, although it acknowledged the uncertainty surrounding future interest rate changes and the impact of recent budget announcements on building costs. In addition, Persimmon said it is seeing some signs of build cost inflation beginning to emerge in price negotiations for 2025.

“We are seeing some signs of build cost inflation beginning to emerge in price negotiations for 2025 and are working closely with our supply chain to manage our costs, which will also be impacted by new building regulations and the employer national insurance increases announced in the recent Budget,” stated the company. “We are seeking to mitigate the impact of these cost increases through robust commercial controls and other management actions.”

However, Persimmon said it is encouraged by early announcements from the government regarding planning reforms and looks forward to the outcome of the consultation on the National Planning Policy Framework.

“Demand for our homes has continued into the autumn selling season, helped by improvements in customer sentiment as interest rates begin to reduce and affordability improves,” stated the company.