Housebuilder Persimmon has issued a warning that the ongoing conflict with Iran could significantly undermine homebuyer confidence in the UK property market. This caution comes as a growing number of mortgage lenders have started to increase their interest rates, driven by fears that soaring inflation expectations, exacerbated by the war, will prevent the Bank of England from cutting the base rate in the near term.
Impact on Mortgage Rates and Inflation
The group stated that it is closely monitoring the potential effects of the Iran conflict on its markets throughout 2026. Persimmon highlighted the risk that increased uncertainty could take a toll on consumer sentiment, which is a critical short-term factor for the housing sector. The company has not factored in any mortgage rate reductions or government demand stimulus into its projections, emphasizing instead the importance of how customers might react to heightened geopolitical instability.
Housing Completions and Economic Assumptions
Persimmon anticipates delivering between 12,000 and 12,500 housing completions this year, but this forecast is contingent on the assumption that the conflict with Iran and its broader impact will be short-lived. The firm noted that it is too early to assess the war's potential influence on build costs, though it expects limited effects in the current year due to existing agreements with key suppliers and accelerated production levels entering 2026.
Bank of England's Monetary Policy
Previously, there was widespread expectation that the Bank of England would reduce interest rates at its upcoming meeting on March 19. However, this now appears unlikely as disruptions in the Middle East have sent fuel and energy costs soaring, potentially leading to a spike in inflation. Some analysts have even predicted that the Bank might consider raising rates if oil prices continue to climb sharply.
Strong Sales Performance Amid Uncertainty
Despite these concerns, Persimmon reported robust sales in the opening weeks of the year. The net private sales rate increased by 9% year-on-year during the first nine weeks, with average selling prices rising by 6%. As of March 1, the firm's private sales order book stood 9% higher at £1.25 billion.
Executive Commentary and Future Outlook
Dean Finch, Group Chief Executive of Persimmon, commented: "Sales in the opening weeks of the year have been strong, and the build-to-rent market is recovering from the slowdown around November's budget. While we have good visibility of both our costs for 2026 and demand from registered providers and build-to-rent, the impact of the Iran conflict on customer sentiment remains to be seen. Assuming the conflict with Iran and its impact is short, Persimmon is set to grow again in 2026."
Financial Results and Profit Projections
The group's full-year results for 2025 showed pre-tax profits rising by 11% to £397.3 million, supported by a 12% increase in new home completions to 11,905. On an underlying basis, pre-tax profits grew by 13% to £445.6 million. Persimmon remains on track to meet 2026 expectations for underlying pre-tax profits to reach £470 million, though this projection is based on the assumption that the Middle East conflict will be brief and its effects contained.
