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Persimmon sets the foundations for recovery

Leading UK homebuilder Persimmon has today given homeowners up and down the UK food for thought after suggesting that house prices were stabilising and the company itself does not plan to issue any more write-downs on its land bank. While the issue of house prices will not come as a major surprise to many people, it is the intention of the group not to write down the value of its land bank in the future which has caught the attention of investors.

The fact the company does not see further downside in the sector indicates that prices have bottomed out and land values will fall no further in the short to medium term. In a further positive note for the sector, the group also announced plans to increase recruitment in the coming months. After cutting more than 2700 jobs in the last two years this is a significant turnaround for Persimmon and its workforce.

As you might expect, many other UK housebuilders saw their share prices rally in sympathy with the upbeat statement although how long this will continue remains to be seen. Housebuilders in the UK still need to address the problem of debt on their balance sheets in the short to medium term although this is much easier to carry out against a background of an improving market.

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