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One sector that has been booming in the UK during the pandemic is residential property. While the property sector was forced to grind to a halt, much like most of the country, in March, as soon as lockdown began to ease, properties started selling like hot cakes.
Largely thanks to the Chancellor’s decision to introduce a stamp duty ‘holiday’, but also down to property-hunters’ desire for gardens and more space, Rightmove (RMV) said activity hit record levels immediately when the housing market reopened in May. And it has continued, with buyer enquiries across Britain as a whole since the start of July having jumped by 75%.
Last week the online property portal said it had experienced continued traffic growth, with visits up 5% year-on-year, helped by a stronger-than-expected increase since the reopening of the property market in England in May.
And it said that new build housing specifically saw record demand, with enquiries about new builds up 21% on the previous record set on 11 June. That is something that housebuilder Persimmon (PSN) has seen too. It said its sales teams even took 1,600 reservations during the lockdown period.
In a trading statement at the start of July Persimmon reported a sharp rebound in activity since mid-May. Average weekly net private sales reservations in the six weeks since then were 30% higher than the same time last year and it reported a 2% rise in the average price of the 5,150 private homes that it had forward sold at the end of June, compared with the same time last year. Sales prices have also held firm, management said.
It has, however, not been unaffected by the pandemic. Although not as bad as might have been expected, it said that from 1 January to 30 June 2020, total revenues were £1.19 billion, compared to £1.75 billion the previous year. Although housing revenues of £1.10 billion for the first six months were 33% lower than the prior year when total revenues were £1.65 billion.
Of course, it is too early to say whether upward sales will be a sustained trend or a short-term one, born out of pent-up property buying during the lockdown and spurred on by the stamp duty ‘holiday’. What makes calling it correctly even more difficult is the fact that, with a recession now officially underway in the UK and the threat of further Covid-related lockdowns and economic turmoil highly likely, the prospects for the second-half of the year are far from certain.
And, during all this, it is also a time of change at Persimmon, which is due to post first-half results on Tuesday. Dean Finch, the former chief executive of National Express, is due to take over from Dave Jenkinson, who announced he would step down as chief executive in February, after just over a year in the role.
Mr Finch will take on a company that should be about to go into the second-half in a strong position. With forward sales 15% ahead year-on-year, and cash holdings of £830 million, its balance sheet looks healthy, certainly by comparison to others in the housebuilding sector.
Persimmon’s reduction of outstanding land creditors due by the end of the year by almost half, further strengthens its position.
Its investors will hope its performance in the second-half - not traditionally prime selling season for housebuilders - will buck the trend usually seen in the winter months and make it through to the other side of 2020, standing strong.
Ahead of Tuesday’s half-year results, brokers certainly seem confident it can. Deutsche Bank maintains its buy rating and has raised its price target to £26.84, from £21.92. Jefferies International also remains a buyer and has raised its price target to £30.86. Credit Suisse rates the shares outperform and has a £29.17 target, while UBS also says they are a buy and has lifted its price target from £24 to £29.50.
More on Persimmon
Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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