Persimmon is one of the largest housebuilders in the UK, completing 15,855 home sales to customers in 2019.
Affordability is a key factor influencing housing demand. Our customers’ ability to afford a home has been supported by low interest rates, favourable competition in the availability of mortgage products and the Government’s Help to Buy policy. This scheme is available in its current form to March 2021 and will be extended in amended form from April 2021 to March 2023.
The Group provides homes for all by providing an attractive range of homes at various price points across the UK, with a focus on the first time buyer, first time mover market. The Group’s average private selling price for 2019 was £241,985 c.18%* lower than the national average. We have a focus on affordability and the first time buyer, first time mover market with 50% of our private new homes going to first time buyers in the year.
Demand continues to outstrip supply for housing. In October 2018, the Government committed to supplying 300,000 homes per year by the mid 2020s to attempt to combat the imbalance between supply and demand. Population growth has been a key driver in demand for housing. Per the ONS, population growth is set to continue at a strong rate, with the total UK population passing 70 million** by 2031.
Over the eight years since 2012 the Group has delivered c.113,000 new homes across the UK. In the same period, we have invested c.£4.3bn in land and provided c.143,000 plots of land into the business to deliver new homes to customers across the UK. At 31 December 2019, the Group holds 93,246 owned and under control plots, 5.9 years supply based on current volume.
Consumer confidence and the health of the UK economy are fundamental factors that support customer demand and a sustainable UK housing market. GfK’s long running consumer confidence index decreased during 2019 with the economic uncertainty resulting from Brexit negotiations weighing on the outlook for household finances. However, the latest measures concerning UK consumers’ personal financial position for the last and next 12 months are encouragingly healthy and positive, as is the improvement in our view of the wider economic picture for the UK. This is linked to the uptick in the jobs and housing markets, coupled with low headline inflation and interest rates. Market fundamentals remain supportive; unemployment rates remain historically low, interest rates continue at lower levels and mortgage lenders are keen to support customers with competitive mortgage products resulting in resilient consumer confidence.
The UK economy grew by 1.4%** in 2019 per the latest estimates, slightly ahead of 2018 growth rates.
The number of mortgage approvals in 2019 of 789,336*** (2018: 781,238) were slightly higher than 2018 reflecting the continuing positive lending environment.
We have a strong network of sites across the UK providing geographic diversification. We closely monitor the market conditions and retain flexibility of operations to ensure that we can mitigate the impacts of the inherent cyclicality of the housing cycle.
The Government remains supportive of the housebuilding industry. Its ambition is to deliver 300,000 new homes by the mid 2020s. Local planning authorities are required to put in place five year plans to meet their housing needs which should ensure a consistent supply of consented land to enable the housebuilding industry to commit capital to long term projects. The Government’s Revised National Planning Policy Framework, published in July 2018, aims to make it easier for planners, developers and local councils to deliver good quality housing in places where people want to live, at a faster pace.
From 1 October 2018, changes were made to the way pre commencement planning conditions work. This was in attempt to speed up the planning process and enable developers to start work on sites in a more timely way. We welcome ways to improve the efficiency of the local planning system and will continue to work with all stakeholders to identify improvements to the system.
The Group’s land buying and management strategy puts the needs of our customers and local government at the centre of its land investment. Each of our 31 operating businesses has an in-house land, planning and design team with local knowledge of their communities’ housing needs. We work closely with local planning authorities so we can provide the appropriate range of well-designed house types and prices for each site to meet local housing needs.
The availability of skilled labour remains a key issue and increasing the supply of trade skills will be essential if the industry is to continue to increase the volume of new homes built in the UK. Brexit and its impact on the free movement of construction workers is also likely to be a factor although this will have more of an impact in the London and South East regions (an area where the Group has a lower presence) due to the relatively high proportion of EU nationals working within the construction industry in those areas.
We have c.750 colleagues (c.15% of our workforce) currently pursuing structured training courses. The Group currently has over 450 apprentices learning traditional craft skills such as bricklaying and joinery, and c.300 professional trainees in areas such as quantity surveying, planning and construction disciplines.
In addition, we continue to work with the Home Building Skills Partnership, a joint initiative of the Construction Industry Training Board (CITB) and the Home Builders Federation (HBF) aimed at addressing the skills shortage within the industry by attracting new entrants to the home building sector, providing focused training to develop the workforce, and fostering closer working relations between developers and their supply chains.
* 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.
** Source: ONS
*** Source: Bank of England