Housebuilders Persimmon (PSN) and Vistry (VTY) posted a sharp increase in earnings for 2021 thanks to strong demand for new homes.
At the same time, the Nationwide survey showed house prices continuing to spiral with the average home costing £29,000 more in February than a year ago.
Shares in Persimmon gained 7% to £24.88 while Vistry added 3.6% to 980p.
DEMAND STAYS STRONG
Both Persimmon and Vistry experienced increased demand for their new-build homes last year, allowing them to raise prices.
Persimmon registered a 7% increase in new home completions to 14,551 units and a 2.8% increase in average prices to £237,000.
Vistry reported a steeper rise in completions, up 23.7% to 11,080 units including partnerships.
Persimmon posted a 12.7% rise in underlying pre-tax profit to £973 million while profit at Vistry leapt from £98.7 million to £319.5 million.
Both firms noted rising cost inflation, with Vistry flagging labour costs in particular, but both managed to improve their gross margins.
Cash generation was high, allowing both firms to increase their capital returns to shareholders while at the same time growing their land bank.
On the issue of cladding, both firms said they had made provisions for ‘known liabilities’.
Persimmon said it had set aside £75 million for remediation work. Vistry has provisioned £25 million but said it may need to add between £35 million and £50 million in charges depending on the outcome of the government’s consultation.
PRICES KEEP ON SOARING
Due to the persistent shortfall in new houses, demand for existing properties continues to push average prices to new highs.
The latest survey by the Nationwide building society showed the average price of a house in the UK jumped by 12.6% or £29,000 in the year to February.
That marks an acceleration in the rate of increase compared with the 11.2% rise seen in January, defying predictions that the housing market would cool significantly after the removal of the stamp duty holiday.
Commenting on the figures, Nationwide's chief economist Robert Gardner said: ‘The price of a typical home rose above £260,000 for the first time in February, an increase of £29,162 over the past 12 months.
‘This is the largest ever annual increase in cash terms since the start of our monthly index in 1991. The price of a typical home is now £44,138 (20%) higher than in February 2020, the month before the pandemic struck the UK.’
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