Shares in Persimmon (PSN) were marked down after the public spending watchdog found that the government’s help-to-buy scheme exposed it to a “significant market risk” and that buyers could find themselves in negative equity if house prices fall.
The National Audit Office (NAO) report underlined that a decline in house prices could hit the return the government makes on its loan book. Homes England expects total repayments to equal the amount loaned by 2031-32 and to have made a positive return on investment by the time all loans are repaid by 2048, based on current estimates of the long-term performance of the housing market.
Persimmon has sold the largest proportion of properties under the scheme compared with other housebuilders at 14.8 per cent of sales in England between 2013 and 2018. Barratt and Taylor Wimpey came in second and third place, respectively. Almost half of Persimmon’s customers used the scheme last year, which has turbo-charged the housebuilder’s profits since it was introduced.
Persimmon declined to comment on the findings of the report or any impact on sales following the end of the scheme.
Under the scheme – which is estimated to have cost £29bn by the time it closes in 2023 – buyers can put down a deposit of just 5 per cent and loan up to 40 per cent of the value of the property in London, or 20 per cent elsewhere.
However, the NAO report found that, given the ‘new build premium’ adds on between 15-20 per cent a house price, those who want to sell soon after purchasing a property could find themselves in negative equity.
The NAO also found that three-fifths of buyers could have bought a home without the help of the scheme.
The report’s criticisms follow news earlier this year that the Ministry of Housing, Communities and Local Government plans to assess developer performance when awarding contracts. Persimmon – which was awarded the lowest score of all major housebuilders in the latest Home Builders Federation new homes survey at three out of five stars – has faced criticism over its construction quality and the accuracy of customer moving-in times.
To address these issues, Persimmon plans to sell homes much closer to the date at which they are completed. However, in the first four months of the year that meant the number of active sales outlets was 350, behind the 375 during the same time in the prior year, and the weekly private sales rate per site was 5 per cent lower.
