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Persimmon forced to slow down home sales and increase build costs to improve quality

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  • 01/05/2019
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Persimmon forced to slow down home sales and increase build costs to improve quality
Housebuilder Persimmon has recorded a fall in the number of sales reservations since the start of the year and will see building costs increase, driven by its actions to improve the quality of the homes it is building, according to a trading update issued today.

 

Persimmon has received heavy criticism from purchasers over the last year about the quality of the homes it was building and it has introduced other measures to help tackle the issue.

This includes a retention programme where up to 1.5 per cent of the property value may be retained by the customer until any snagging issues are cleared up.

It has also introduced an independent review into the business, including workmanship and customer service.

The trading statement said Persimmon was changing the timing of house sales to focus on quality.

“We continue to expect our overall build costs to increase by about four per cent for the year,” the builder said.

“This includes ongoing investment to enhance specification in support of improved levels of customer satisfaction and is after mitigation through progressing our off-site manufacturing activity and reviewing our approach to infrastructure development costs,” Persimmon stated.

So far this year, total forward sales revenue, including legal completions, slightly decreased to £2.7m from £2.8m in the same period in 2018.

However, Persimmon said that it was confident that these sites would make a good contribution to sales once the homes were released for sale.

Overall, the trading update revealed that sales reservations remained in line with the expectations, achieving a similar level of legal completions in the first half as last year.

Mortgage Solutions has contacted Persimmon but the housebuilder declined to comment further.

 

Pricing steady

After recognising the actions taken to improve customer service, the group had 350 active sales outlets for the year to date compared with 375 in 2018.

Its weekly private sales rate per site since the start of the year was five per cent lower than the previous year.

It said pricing conditions remained firm across the regional markets, the average selling price of sales to the private market in its forward order book being about £237,850 compared with £236,500 in 2018.

The group has opened 43 of around 90 new outlets planned for the first half of the year and is building new homes on all sites that have a detailed planning consent.

The board has also recently concluded the renewal of its £300m revolving credit facility with strong support from the group’s five relationship banks.

 

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