Page last updated at 12:06 GMT, Monday, 27 October 2008

Persimmon lowers housing forecast

Persimmon show area
Despite sharply declining land value, it will stick to social housing targets

UK housebuilder Persimmon has warned its already-gloomy outlook for the firm has worsened as house prices tumble.

The York-based company expects a 10% drop in the selling price of its new homes for the second-half of 2008 - double the 5% it had earlier predicted.

And as many as 40% of those who had put deposits on homes have walked away as they struggled to get mortgages or saw property values fall, Persimmon said.

The value of land held for development had fallen 600m since June, it added.

That drop represents 19% of the company's total value across the whole business.

No improvement

The group, which expects to sell 10,000 homes this year said it had "encountered deteriorating trading conditions" since reporting half year results on 21 August.

"The uncertainty created in the housing market by the increasingly turbulent and uncertain outlook in financial markets has had a negative impact on all our regions across the UK," it added.

Sales revenues for the year so far were 1.8bn, with 250m of sales for 2009 already secured, it said.

And targets to increase social housing sales by 25% this year remained on track the company said.

However, cancellation rates - the number of cancelled deposits for new homes - have risen to 35% and "have touched 40% in the last few weeks" according to a Persimmon spokesperson.

Persimmon said it was "fully supportive" of the Government's initiatives to increase mortgage availability to 2007 levels - one of the conditions of the bail-out of UK banks.

"Until this begins to take effect we do not expect to see any improvement in trading conditions and we continue to carefully monitor all our activities," it said.

Persimmon added that the early release of its third-quarter report - which had been expected in November - was due to "further pressure being experienced on selling prices and, consequently, residential land values" as a result of the current crisis in the financial markets.

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