Housebuilding giant Persimmon has reported tumbling homebuyer demand, rising cancellations and falling prices as economic gloom and soaring mortgage rates hit Britain’s property market hard.

The Charles Church owner said the average weekly sales rate per outlet in the private market dropped to 0.6 between July 1 and November 7, down from 0.78 a year earlier – and fell further to 0.48 in the most recent six weeks.

Customer cancellations have also ramped up, to 28 per cent in the past six weeks, from 21 per cent in the previous three months.

It said the tougher selling conditions have seen prices drop by around 2 per cent in the six weeks to November 7, when Britain was gripped by financial market turmoil sparked by the mini-budget and unprecedented political upheaval.

Persimmon said it remained on track for between 14,500 to 15,000 new home legal completions in 2022, but warned that it expects fewer legal completions in 2023 and said lower prices were likely to hit its profit margins.

Dean Finch, group chief executive, commented: “Persimmon entered 2022 in a strong position with healthy forward sales and good weekly sales rates which continued throughout the first half of the year.

"This, together with our increasing levels of build efficiency, means we are well positioned to deliver new home completions for the year within our previously stated target range, while maintaining an industry-leading housing margin, despite the recent deterioration in market conditions leading to increased cancellation rates.

Mr Finch added: “Rising interest rates and broader economic uncertainty are clearly impacting mortgage lending and customer behaviour and this is reflected in our recent weekly sales rates and forward sales position.

Library image of people looking at homes for sale in an estate agent's window,

"Persimmon enters this more challenging period as a five-star builder, with average selling prices below the market average, high quality land holdings, and a robust balance sheet. The recent strengthening of our land holdings with disciplined investment will maintain our industry-leading embedded margins.

“Our highly experienced senior operational management team are drawing on their decades of detailed knowledge across many housing cycles to continue to rigorously assess every aspect of our business to ensure we are building quality homes for customers in the most cost-efficient manner.”

Mr Finch said the company recognised how important sustainable returns are for shareholders. He said Persimmon was setting out a new capital allocation policy that balances this with the need to invest.

He added: “We were proud to lead the industry with our pledge to protect leaseholders from the costs of cladding removal in any multi-storey development built by Persimmon. We have made good progress and continue to proactively engage with management companies to agree work plans.

"This proactive programme, together with more certainty over the broadened scope of work required by the Government, means we are increasing our provision to meet our pledge to protect leaseholders.”

Rising interest rates and economic uncertainty are hitting property market, says Persimmon