Persimmon: Housebuilder sounds alarm over building cost inflation
Leading housebuilder Persimmon has sounded the alarm over rising supply costs due to the Iran war as demand begins to soften.
The housebuilder, one of the UK’s largest, said on Thursday it is beginning to see inflation in its supply chain, which it said could impact its finances as soon as the second half of this year.
The government is leaning on housebuilders to clinch its 1.5m homes target, but industry figures have warned that building material costs could soar due to the Iran war.
The FTSE 100 firm said: “There are early signs of increased inflation in the supply chain, driven by higher energy costs, which are likely to impact the second half of 2026 and into 2027.
“We are looking to mitigate these where possible through our strong relationships with our suppliers and subcontractors.”
But the housebuilder said it has not yet seen any “material impact” from the conflict in the Middle East.
Demand for homes weakens
Despite looming inflation, Persimmon said net sales per week are three per cent higher than last year, with forwards-looking sales up by seven per cent to £1.8bn.
The housebuilder’s share price jumped by more than two per cent in Wednesday’s early trading, to 1,053p, as stock brokers hailed the company’s resilience.
Mark Crouch, aanalyst at eToro, said: “Persimmon’s update suggests a housing market that, for now, is holding firm, but the bigger picture for UK housebuilders is rapidly darkening.
“Persimmon’s numbers look solid enough, forward sales up, pricing holding firm, and volumes broadly in line with expectations.”
Property experts have warned the expectation of interest rates staying higher for longer due to the Iran war has caused Brits to hold off buying homes, as they wait for better mortgage rate deals.
Persimmon said it has seen enquiries for new homes “soften slightly” in recent weeks, but the housebuilder said sales have remained “resilient”.
“We continue to be mindful of the potential effects on consumer confidence and affordability, with some increases in mortgage rates seen since early March,” the firm said.
At its full-year update at the end of last year, the housebuilder praised a “supportive” economic environment, as the construction and property industries recovered from a period of uncertainty around the Budget.
Persimmon notched an 11 per cent increase in profit, rising to £397m in the year to December.
Housebuilders cut back on spend
But the mood around housebuilders has changed dramatically since the Iran war broke out in February, as house buying demand takes a beating from fears that interest rates will stay higher for longer.
Earlier this week, Taylor Wimpey became the latest housebuilder to tone down its expectations with a cautious update, warning that building costs could be set to rise.
Earlier this month, Barratt Redrow – the UK’s largest housebuilder – said it will dramatically cut back its spending on land, citing a need for caution amid the economic knock-on of the Iran war.
Housebuilder Berkeley saw its share price plummet at the start of April after it said it would pause land buying completely, amid an “unprecedented increase in cost and regulation”.