Persimmon Cashing in on UK Housing Boom

Persimmon sales are soaring amid the UK housing market revival.

The firm, which is one of the largest house builders in the UK, said in a trading update that its revenues had lifted 33% in the first six months of 2014 when compared to a year before, hitting £1.2bn ($2bn, €1.5bn).

A recovering domestic economy and cheap mortgages thanks to the Bank of England's record-low base rate is fuelling a housing market revival.

House prices in the UK are beginning to return to pre-crisis levels, pushed up by rising demand and a shortage of supply.

According to the Office for National Statistics (ONS), the average price of a UK home jumped 9.9% to £260,000 in the year to April 2014.

Persimmon said its average selling price increased by 4% over the year to £186,000 "primarily due to a continued increase in the proportion of larger family houses in the sales mix".

"Customer demand for good quality housing in attractive locations remains firm across all our regional markets," the construction company added.

And forward sales are strong too. It said it has around 4,100 new homes sold forward into the private sale market, a 29% acceleration on the previous year with an average selling price of £204,600.

Persimmon welcomed measures to ease concerns over the mortgage market. Households are taking on more debt to pay for larger house prices.

This runs the risk that some who stretched themselves will be unable to afford the repayments when the Bank of England hikes interest rates from their current lows.

As a result, the Financial Conduct Authority (FCA) and Bank of England have imposed stricter affordability tests on potential borrowers to ensure they can make the repayments in a a number of different scenarios, such as interest rates rising.

And the Bank of England has put an electric fence around the market. From October 2014, lenders will only be able to make up 15% of their net new mortgage lending with loans that are worth 4.5 times or more the applicant's income.

"Mortgage lenders have continued to support customer access to the housing market, exercising discipline in the improving market," said Persimmon.