UPDATE 2-Persimmon writes down land value by 600 mln pounds

* Move follows falling house sale prices

* Sees prices down 10 pct in H2 vs previous forecast 5 pct

* Sees FY underlying trading in line with market forecasts

* Sees FY cash generation in line with previous guidance

* Stock up 4.95 pct after initially falling 8 pct

(Recasts, adds details)

LONDON, Oct 27 (Reuters) - British housebuilder Persimmon (PSN.L) said on Monday that falling house selling prices have resulted in it writing down the value of its land holdings by a further 600 million pounds.

The move -- which follows a writedown of 40 million pounds at the half-year stage -- represents around 19 percent of the value its land bank at June 2008 and comes amid "deteriorating trading conditions", it said.

Persimmon said it expects prices to fall 10 percent in the second half of the year, more than an earlier forecast of 5 percent, as the UK housing market continues to weaken.

However, the company said it expects its borrowings to fall in the second half and for cash generation to be in line with previous guidance.

It also said it continues to comply with all its financing covenants and expects its full-year underlying profit to be in line with market expectations of around 135 million pounds.

Persimmon shares fell 8 percent in early trade before recovering by 0947 GMT to trade up 4.95 percent at 228 pence.

The housebuilder said the uncertain financial outlook had hit all its sales areas in the UK, mortgage availability remains restricted and cancellation rates are at around 35 percent.

It expects to complete around 10,000 homes for the year to end-Dec while sales revenue for the year to date is around 1.8 billion pounds ($2.81 billion).

The company said it was taking a cautious approach to spending on work-in-progress and would continue to reduce its landbank "in line with the scale of its business". It also said it would increase its social housing sales volumes.

Persimmon said it supports the UK government's initiatives to increase mortgage availability to 2007 levels, but until this begins to take effect it does not expect to see an improvement in trading conditions. (Reporting by Simon Jessop; Editing by Erica Billingham and Chris Wickham)