April 18, 2013 / 9:26 AM / 5 years ago

UPDATE 1-Housebuilder Persimmon to enter rental market with 600 homes

* Says government funding makes investment viable

* Homes to be located across 16 schemes in the UK

* To bring forward dividend payment planned for

* house purchase enquiries were up 30 percent on last year,

By Brenda Goh

LONDON, April 18 (Reuters) - British housebuilder Persimmon Plc plans to build more than 600 homes for rent, the latest in a wave of investors looking to profit from Britain’s growing rentals market.

Recent government pledges to support the market, as well as a growing trend of Britons unable to afford to buy a home and opting to rent instead, is attracting a slew of institutional investors and developers.

Persimmon, Britain’s largest housebuilder by stock market value, was among 45 companies shortlisted by the government on Tuesday as potential beneficiaries of a 1 billion pound ($1.5 billion) pot to help fund the construction of rental homes.

“We’re seeing that there is some demand throughout the country for people who need to rent, not everyone wants to buy,” outgoing Chief Executive Mike Farley told Reuters on Thursday.

The government support “makes it financially viable for both ourselves as well as for the institutions which will hopefully invest in this,” Farley said, adding it would be the first time Persimmon had built rental homes.

The homes will be part of 16 schemes that Persimmon is building across Britain in cities such as Exeter and Coventry, Farley said. Up to 10 percent of each scheme, or about 40 to 50 homes, will be rented out, while the rest will be sold.

He said the company was in discussions with various institutions, such as insurers and pension funds, to partner on the schemes to assist with financing and the management of the homes. It will start work on the projects later this year.


Insurers and pension funds are preparing to spend 7 billion pounds on such homes, encouraged by the stable returns compared with shops or offices and the government’s efforts to help the housing market, property advisors CBRE Group and EC Harris have said.

A real estate investment arm of insurer Prudential agreed earlier this month to buy 534 homes from developer Berkeley Homes for 105 million pounds, the first big deal in recent years by an investor in UK rented housing.

Persimmon also said in a trading update it would it pay out a dividend of 10 pence per share to shareholders in June next year, accelerating a payment originally scheduled for 2015 under a plan set out last year to distribute a total of 1.9 billion pounds over a nine and a half year period.

Farley, who is retiring, will be succeeded on Thursday by Managing Director Jeff Fairburn.

The company said house purchase enquiries were up 30 percent on last year, having already been up 24 percent even before the government unveiled a scheme in March to help struggling home buyers. Its current total forward sales are up 11 percent at 1.38 billion pounds compared with 2012.

Shares in Persimmon, which have risen by over 70 percent over the past year, were 1.4 percent higher at 1,121 pence by 0845 GMT, valuing the company at 3.4 billion pounds. The stock earlier this week hit a near six-year high of 1,146p.

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