Cancellation rates at homebuilder Persimmon have risen 35 per cent as the mortgage crisis continues to scare off potential buyers.
In its Interim Management Statement yesterday, Persimmon confirmed that the number of people who have put down deposits of up to £700 on new homes and pulled out has now hit 35 per cent – around 20 per cent higher than the normal average.
"Since we reported our Half Year results on 21 August 2008 we have encountered deteriorating trading conditions," said the statement.
"The uncertainty created in the housing market by the increasingly turbulent and uncertain outlook in financial markets has had a negative impact on all our regions across the UK."
According to Moneysupermarket.com, the number of mortgage
products available to first time buyers and people looking to remortgage
has fallen a dramatic 86 per cent since April, and Persimmon says that this drop is one of the main contributors to the rise in cancellations.
"The availability of mortgages has continued to be very restricted and cancellation rates have increased to 35% over recent weeks due to these market uncertainties," said Persimmon.
"Sales conditions remain extremely competitive, while incentives and marketing costs are increasing leading to further margin pressures."
Persimmon also revealed that, due to the fall in price at which it is able to sell its houses, the value of its land holding has also fallen and it is writing down the land value by £600million – 19 per cent.
The company admitted that if conditions stay as they are, improvement in its sales are unlikely, so it is therefore "fully supportive" of the Government's initiatives to increase mortgage availability to 2007 levels.
"Until this begins to take effect we do not expect to see any improvement in trading conditions and we continue to carefully monitor all our activities," said the statement.
"In the meantime our focus remains on generating cash and reducing overall working capital levels to maintain a strong balance sheet for the future."
©Fair Investment Company Ltd