Persimmon, one of the UK's largest housebuilders, has sounded the alarm over rising supply costs due to the Iran war as demand begins to soften. The FTSE 100 firm said on Thursday it is beginning to see inflation in its supply chain, which could impact its finances as soon as the second half of this year.
Early signs of inflation
The government is leaning on housebuilders to achieve its 1.5 million homes target, but industry figures have warned that building material costs could soar due to the Iran war. Persimmon stated: "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." The company added: "We are looking to mitigate these where possible through our strong relationships with our suppliers and subcontractors." However, 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 reported that net sales per week are three per cent higher than last year, with forward-looking sales up by seven per cent to £1.8 billion. Property experts have warned that 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 noted that enquiries for new homes have "softened slightly" in recent weeks, but sales have remained "resilient." The firm said: "We continue to be mindful of the potential effects on consumer confidence and affordability, with some increases in mortgage rates seen since early March."
Housebuilders cut back on spend
At its full-year update at the end of last year, Persimmon 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 £397 million in the year to December. 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."
