Gemma Harle: Persimmon results prove Help to Buy is flawed

Michael Lloyd

February 26, 2019

Persimmon’s bumper results highlight serious problems with the Help to Buy scheme – which has funded enormous bonuses for executives at housebuilders, says Gemma Harle, managing director of the Intrinsic mortgage network.

The housebuilder has reported £1.1bn of profit for the year.Persimmon sold 16,449 homes last year, of which 7,977 were using the Help to Buy scheme, up 7,682 from the previous year. There was a13% rise in group profit before tax, reaching £1.091bn from £0.966bn in 2017.

Persimmon attracted controversy last year after paying out its former chief executive Jeff Fairburn £75m after increasing profits with the help of the taxpayer-funded scheme.

Harle said: “In the wake of Persimmon’s bumper results announced this morning, today’s statistics surrounding the success of the Help to Buy ISA scheme are somewhat bittersweet.

“However, when you take a deeper dive into Help to Buy, the scheme throws up some serious faults, one of which being that some housebuilders are enjoying tremendous results off the back off a tax-payer funded programme and subsequently paying their executive’s outrageous sums of money. Just look to Jeff Fairburn’s on-camera debacle last year for proof.”

Harle also highlighted other issues with Help to Buy.

She added: “In regards to the Help to Buy equity loan scheme in particular, is that some first time buyers are being left as mortgage prisoners. Those who first took out 5-year fixed rate mortgages back when the scheme started are now having to both repay the equity loan and needing to remortgage in a higher interest rate environment.

“Added to this, there is distinct lack of remortgaging options from lenders in the market involved in the scheme leaving people trapped paying an expensive variable rate mortgage.

“Similarly, the scheme pushes too many people into buying new build houses. This disrupts the chances of people further up the chain moving which could lead to a stagnant market. While getting people to own their own home should be a priority it should not mean that those further up the chain pay the price for this.

“Clearly the government needs to incentivise companies to build more housing stock, however the Help to Buy scheme might not be quite the finished article and any other scheme put in its place when it comes to an end in 2023 needs to be able to cope with a very finely balanced market place, where simple schemes which on the face of it help some can have disastrous consequences for others.”

Tom Brown, managing director of real estate at Ingenious, said: “The company has been in the firing line since the scandal broke of the bonus awarded to its now ex chief executive.

“The government is right to put housebuilders under the spotlight as a condition of their inclusion in the key Help to Buy scheme which has underpinned pricing in the sector since being announced in 2013.

“Alongside good financial governance, the government should drive best practice across the industry in relation to build quality and after sales service.

“This coupled with local councils demanding funding infrastructure, can ensure that everyone shares in the benefits that new development can bring to communities.”

Persimmon’s finance officer, Dave Jenkinson, who has been acting chief executive since Jeff Fairburn, its former boss left after receiving a £75m payout, will now take the chief executive role on permanently.

The housebuilder’s legal completion volumes increased by 406 new homes to 16,449 with an average selling price of £215,563, up 1% year-on-year.

Jenkinson said: “Our results for 2018 reflect our successful focus on offering attractively priced new homes primarily to the first time buyer and first time mover markets, where housing need is greatest.

“This strategy has enabled Persimmon to grow its construction volumes by more than 75% since 2012, making a significant contribution to UK housing supply.”

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