Persimmon pulls out of South Wales valleys

Picky Persimmon pulls plug on plots planned north of Pontardawe to Pontypridd.

House builder Persimmon, has announced it is to stop building new homes in parts of south Wales saying it does not make enough profit on developments north of Pontypridd because of lower selling prices. The company builds around 1,000 homes a year in Wales, has now confirmed that their Coed Dyffryn development in Aberdare, will be its last in the valleys

Persimmon has introduced what it refers to as a “snowline” – the point at which nothing grows because of perpetual snow and ice – running across south Wales on a level with Pontypridd. Their “snowline” is from Pontardawe to the west to Pontypool in the east. Persimmon said it has stopped buying any land in this area, because it says it cannot make sufficient profit due to the comparatively low selling price. A three-bedroom home on a development in the valleys would be priced at around £120,000 but the same house would sell for £160,000 nearer to Cardiff, Newport or Swansea.

Persimmon Snowline1

Cardiff University Professor John Punter,  said “it seems really peculiar to pick out the northern valleys above Pontypridd as a focus of their unprofitability. We know perfectly well that the first place the house builders are going to build in Wales will be in the areas of high demand. They won’t be in the northern valleys anyway. “

Persimmon’s announcement came a day after the Welsh Government announced plans to invest £130 million in a housing finance scheme to build affordable homes across Wales during the next 30 years, with more than 1000 social and affordable houses expected to be built in Wales over the next two years

Persimmon also took the opportunity to also blame additional red tape in Wales, with their regional managing director Glyn Mabey claiming it increased the cost of building a new house in Wales by £3,000 compared to many areas in England.

After competitor Redrow weighed in with similar criticism, saying parts of Wales risked becoming no-go areas if tougher building regulations were introduced in Wales, Welsh housing Minister Carl Sargeant, announced a major relaxation of the new regulations in July. These included an 8% cut in carbon emissions rather than the planned 40%, saving £4,000 on the cost of building a house. In addition, plans to enforce the introduction of sprinklers in new properties will now be phased in between 2014 and 2016, later than originally intended.

P1000478Persimmon also said the conditions imposed by local authorities in south Wales along with the length of time the planning process takes also makes it hard to make the necessary profit. In August, Persimmon reported that profits for the first half of 2013 had increased 40% to £135.3 million and earnings per share (EPS) up 35%. The average selling price increased 7% to £179,200. The company has written to the Welsh government, local authorities and held talks with the senior planning officers warning Wales was lagging behind England in terms of house building.

Perhaps other house builders will follow Persimmon lead and stop building in other less profitable areas such as the north east. Already, Linden (*£262,000), part of Galliford Try, and Crest Nicholson (*£241,000) focus their operations in the higher priced south east of England with Berkeley (*£354,000) building predominantly in London. (* The most recently reported average selling prices)

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