Persimmon could get twin boost from rate cut and Labour planning reforms

Persimmon is expected to signal early signs of optimism for the embattled housebuilding sector next week, after a Bank of England rate cut and the announcement of new Government planning policies.

The London-listed firm is set to report its interim results for the first six months of 2024 on Thursday, August 8.

Investors are looking for at least £1.25 billion in revenue, while analysts will also pay close attention to Persimmon’s forecast for how many homes it will complete this year.

Last year, Persimmon recorded 0.58 net private home sales per outlet per week, a key industry metric, down from 0.69 in 2022.

By April’s first quarter update, that had improved to 0.66, and any further momentum could help strengthen its guidance for total annual home completions, which was between 10,000 and 10,500 at the last update.

Last month, Taylor Wimpey steered towards the top end of its own completions guidance, pointing to housebuilder-friendly planning reforms from the Labour Government.

Persimmon shareholders will hope it points to the same, after chancellor Rachel Reeves said the national planning policy framework will be reformed.

The policy will include restoring mandatory housebuilding targets for local authorities as part of the drive to build 1.5 million homes over five years, a figure which is expected to help builders.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “After a shaky 2023, Persimmon’s first-quarter trading showed some encouraging signs of improvement.

“Sales rates edged slightly higher in the period alongside a growing order book, indicating that buyers’ confidence was improving. Investors are keen to see if that positive momentum continued into the second quarter.

“A change in government and promises to refresh planning regulations have brought some early signs of optimism to the sector, and we’re keen to see how, or if, management tweaks the medium-term outlook as a result.”

Persimmon could be further buoyed by the Bank of England’s decision to cut interest rates by a quarter point to 5% on Thursday.

Shares in Persimmon were trading at a 12-month high last week, though cautious language from Bank of England governor Andrew Bailey after the rate cut caused them to slip.

The decision is not expected to drastically affect mortgage costs, because providers have already started offering better deals in expectation of a rate cut.

However, it is expected to provide a boost to the hopes of people who are trying to buy and sell their homes, which could be crucial in adding momentum to the market.

Richard Donnell, executive director of research at Zoopla, said on Thursday that it will give a “further confidence boost to the housing market rather than heralding the start of a big drop in mortgage rates”.