Housebuilder Persimmon is expected to report a rebound in profits next week after two years of steep declines, after the housing market made a slow recovery in 2024.
The FTSE 100 company will post its financial results for last year on Tuesday
In January, Persimmon said profit would come in towards the top end of its £349m-to-£390m forecast, marking a small improvement from last year.
In 2023, profits nearly halved to £352m after soaring inflation and high interest rates hobbled the UK’s housing market.
Housebuilders have pointed to improving demand in 2024, helped by inflation falling from its 2023 highs and several interest rate cuts by the bank of England, which have brought down mortgage rates.
But investors will be keeping a close eye on Persimmon’s outlook for 2025 as inflation has started to rise again.
Firms like Persimmon will not have been helped by February activity in Britain’s residential construction sector plunging to levels not seen since the pandemic, according to a recent poll of companies.
Data released by Halifax on Friday showed that average property prices dipped about £213 in February compared with the previous month.
Experts said Persimmon is likely to forecast a £430m profit for 2025.
Aarin Chiekrie, an analyst at Hargreaves Lansdown, said Persimmon’s in-house materials businesses should reduce the impact of building cost inflation for the company.
The fact that Persimmon’s houses tend to be priced below the national average means demand will “hold up relatively well even if the current affordability pressures persist”, he added.
Dan Coatsworth, an analyst at AJ Bell, said: “It is possible that the early stages of 2025 are getting a boost from the combination of lower interest rates and the imminent end to 2022’s lowering of stamp duty land tax thresholds, which will return to their prior levels on 1 April this year. Overall, however, housing affordability remains a key issue.”
Separately, London-focused builder Berkeley Group will post its third-quarter update on Friday.
The company has previously guided that pre-tax profit will fall about 6% to £525 million during the current financial year.
Chiekrie added that Berkeley could struggle after “buyer preferences (shifted) towards slightly cheaper properties in the first half”.
By Alex Daniel, PA Business Reporter