Persimmon: Shares Appeal as Firming Sales Rate Suggests a Cyclical Housing Market Recovery in 2024

Persimmon’s January 2024 trading update reaffirmed our optimism for the no-moat homebuilder, with the significant improvement in Persimmon’s weekly private sales rate in late 2023 constructive for Persimmon’s 2024 outlook and its U.K. homebuilder peers alike. Persimmon’s weekly private sales firmed to 0.69 per active outlet, rising appreciably from 0.48 in the previous quarter and from 0.3 a year ago amid the depths of the U.K. housing market’s cyclical downturn. We think the marked improvement in Persimmon’s fourth-quarter sales rate is highly suggestive of a housing market entering cyclical recovery. Further, we expect the recent drop in U.K. swap and mortgage interest rates—in mid-December 2023 as interest rate markets reacted to improving inflation data points in the U.K.—will likely lend further support to the housing cycle in 2024.