Investment Case
The UK housing market
Our Marketplace
The UK housing market started strongly with some signs of weakness emerging during the summer months. Demand particularly weakened in the fourth quarter as economic uncertainty, high inflation and an increase in interest rates impacted consumer confidence.
Housing Supply
A substantial shortage of homes is still evident in the UK with an estimated shortfall of c.1.3m 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.
How we are responding
We continue to play our part in addressing this challenge, delivering 14,868 homes in 2022 (including 2,694 home to our housing association partners). This brings the total number of homes delivered to 146,121 over the last 10 years. We offer high quality homes that are affordable, with our average selling price significantly below the market average1.
Estimated homes shortfall
Government’s ambition
Net additional dwellings

Mortgage Availability and Affordability
Mortgage availability and affordability came under pressure in 2022, with interest rates increasing materially in the second half of the year. This, combined with the closure of the Government Help to Buy scheme in England, had a material impact on affordability, particularly for first-time buyers. We estimate that the monthly cash cost of mortgage payments for some first-time buyers approximately doubled during 20222 compounded by limited availability of high loan to value mortgages.
There was some stabilisation in the mortgage market towards the end of the year along with a reduction in interest rates, albeit availability of 95% loan to value products remained limited. In Wales, the Welsh Government announced in December its intention to extend the scheme for a further two years until April 2025.
How we are responding
The Group provides 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 selling price of £272,206, which is over 20% below the UK national average1.
With the closure of Help to Buy in England, we are looking at alternative solutions to help first-time buyers. We have signed up to Deposit Unlock, a scheme devised in collaboration with lenders and the housebuilding industry, which enables buyers to purchase a new build home with just a 5% deposit. Considering the demand for home ownership within the UK, Persimmon is well placed to continue to provide homes for its customers over the long-term, given its range of house types and price points.
Increase in Bank of England base rate during 2022 +325bps
Mortgage approvals in 2022
Quoted monthly mortgage rates

Skilled labour and materials
During the year, the UK construction market continued to see high build cost inflation as a result of material shortages, compounded by the conflict in Ukraine and resulting impact on energy prices. Overall, build cost inflation was 8-10% in 2022. With energy costs having peaked and a weaker outlook for the housing market in 2023, we would anticipate this to soften as we progress through the next financial year.
The shortage of skilled workers, as a result of an ageing workforce and labour migration post-Brexit, also continues to present challenges for the industry.
How we are responding
We have a strong supply chain across the business and we look to make use of Group agreements where possible to keep costs down. Our vertical integration helps to protect us from supply chain shortages, and we are expanding the product range. For example, we added ridge tiles to our Tileworks products during 2022.
To address the labour shortage, we continue to recruit and train large numbers of apprentices and trainees alongside our graduate recruitment programme. We engage with schools and colleges and support subcontractors’ apprentice recruitment.
Planning and regulation
During 2022, new Building Regulations came into effect, with parts L, F, O and S applicable for new developments from June 2022, covering all developments from June 2023. Amendments to Part L require a c.30% improvement in the efficiency of a new home, which will result in new homes having improved insulation, ventilation and more efficient boilers, some may also have solar panels. The Future Homes Standard (‘FHS’), which is likely to be implemented in 2025, requires a c.80% improvement in the efficiency of a new home. In December 2022, the Government launched a consultation into the Levelling Up and Regeneration Bill which seeks views on the proposed approach to updating to the National Planning Policy Framework. While the government has reconfirmed its commitment to delivering 300,000 new additional dwellings p.a., it has recommended the removal of ‘top down’ housing targets and the lack of clarity is causing further delays in a challenged planning system.
How we are responding
The Group is supportive of the objectives to improve the quality of homes and is well placed to continue delivering sustainable and attractive developments through our Group master-planning team. The time taken to achieve planning consents continues to increase, and we are working with local authority teams to help speed up the process. We welcome initiatives aimed at increasing the efficiency of this system. The Group strongly supports the initiatives to reduce carbon usage within the industry and is already heavily involved in the research and implementation of greener building methods through our Low Carbon Homes Steering Group.
1. Based on the Group’s private average selling price of £272,206 for the year to 31 December 2022 compared with the 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.
2. Illustration based on a property price of £250,000 with an estimated monthly mortgage cost of £753 in March 2022 (Help to Buy customer, with 5% deposit, 75% loan to value mortgage at a rate of 1.53% and 25 year term) compared with an estimated monthly mortgage cost of £1,488 in December 2022 (Deposit Unlock customer with 5% deposit, 95% loan to value mortgage at a rate of 5.71% and 25 year term).