Investment Case

The UK housing market

Our Marketplace

The housing market has performed well throughout 2021, with strong demand for our high quality homes across each of our regions around the UK.

Strong demand throughout the year has been supported by: low interest rates, good levels of mortgage availability, government support measures and changing customer preferences brought about by flexible working and the ‘search for space’. Early indications are that 2022 will continue to benefit from this supportive market backdrop. The Zoopla Price Index for January, for example, showed a c.50% rise in demand for homes in the first few weeks of 2022.

The Group has experienced strong sales rates and enquiry levels throughout the year, the Group’s average private weekly sales rate was c.9% higher year on year and c.22% ahead of 2019. 2021 saw a number of challenges including rising cost inflation and supply chain restrictions. The Group’s experienced management team, high quality land holdings and vertical integration through its Brickworks, Tileworks and Space4 manufacturing facilities provided a strong financial and strategic platform to continue to deliver high quality homes at affordable prices. This together with increasing average selling prices lead to the Group continuing to deliver industry-leading margins.

Housing Supply

A substantial shortage of homes is still evident in the UK, with an estimated shortfall of 1.26 million homes in England since 2010. The Government’s ambition to deliver 300,000 new homes per year in order to tackle the long-term housing crisis in the UK remains. The Group has continued to play its part in addressing this need, delivering 14,551 homes in 2021 (including 2,533 homes to our housing association partners) and 141,156 homes over the last 10 years. Due to its strong liquidity, high quality land holdings in desirable areas and strong network of sites across the UK, the Group remains in a healthy position to continuously deliver a high number of quality homes throughout the UK at a range of competitive prices.

The Farriers 9

Mortgage Availability and Affordability

Mortgage availability strengthened throughout 2021, with gross overall lending reaching record levels of £316bn. Strong demand for homes and record low interest rates led to increased affordability and availability within the mortgage market. The number of high percentage loan to value ratio mortgages also increased in 2021. The full stamp duty holiday remained in place until June, with an additional extension on properties bought up to £250,000 until September. The Bank of England recorded c.952,600 mortgage approvals in 2021, an increase of 16.4% from c.818,500 in 2020.

The Group occupies a strong position within the UK housing market, providing a range of house types at attractive prices, enabling its customers to benefit from the security of owning their own home. The Group provides quality homes for all, with an average private selling price of £259,231, which is over 20% below the UK national average1. In addition, c.50% of private sales went to first time buyers.

The current Help to Buy: Equity Loan scheme, whereby the government lends first time homebuyers up to 20% (40% in London) of the cost of a newly-built home, is available until 31 March 2023. Deposit Unlock, a scheme devised in collaboration with lenders and the housebuilding industry, enables buyers to purchase a new-build home with just a 5% deposit. Given the demand for home ownership within the UK, Persimmon is well placed to continue to provide homes for its customers given its range of house types and price points.

Skilled Labour

Rising material prices and a shrinking skilled labour force continue to impact the construction industry. The Group continues its investment in new talent, with over 650 trainees and apprentices across the business. Space4, the Group’s timber frame manufacturing facility, supports increased site production and efficiencies by reducing the time to build the ‘superstructure’ of a new home by almost two thirds whilst easing the reliance on site of some of the traditional construction skills (e.g. bricklaying).

Planning and Regulation

The Government remains committed to its target of supplying 300,000 new homes per year across the UK and continues to support the industry with reforms aimed at streamlining the planning process. In July 2021, the National Planning Policy Framework was revised with major updates aimed at providing sustainable developments, improving biodiversity and improving design quality. The Environmental Act published in November 2021, states that biodiversity gain is to be a condition of planning permission in England. The Group is supportive of all these objectives and well placed to continue delivering sustainable and attractive developments through our Group master-planning team. The time taken to achieve planning consents is increasing as Local Authority planning teams are experiencing resourcing issues. We welcome initiatives aimed at increasing the efficiency of this system.

Amendments to Part L of the Buildings Regulations require a c.30% improvement in the efficiency of a new home. As a result of this change in regulation, new homes will have improved insulation, ventilation, more efficient boilers and some may have solar panels. The Future Homes Standard, which is likely to be implemented in 2025, requires a c.80% improvement in the efficiency of a new home, for example new homes will no longer have gas fired boilers. In addition, the Government released its ‘Net Zero Strategy: Build Back Greener’ policy in October 2021, outlining its strategy for greener construction methods with the aim of becoming Net Carbon Zero by 2050, including an increase in timber frame construction. The Group strongly supports these initiatives and is already heavily involved in the research and implementation of greener building methods through our Low Carbon Homes steering group.

1. Rolling 12 month national average selling price for newly
built homes sourced from the UK House Price Index as
calculated by the Office for National Statistics from data
provided by HM Land Registry.

Five Year Summary

Our figures for the period 2017-2021, updated annually.

Five Year Summary

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