BTDPY Barratt Redrow PLC (PK)

By Olga Cotaga

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LONDON--Persimmon PLC (PSN.LN) said long-term demand in the U.K. housing market continues to provide opportunities, as it reported a 12% rise in first-half revenue to 1.49 billion pounds ($2.18 billion), even as shares in the sector declined following the Brexit vote.

The U.K. house-builder, which doesn't have any London exposure at all, said on Tuesday that it sold 7,238 new homes in the first half at an average price of GBP205,500, an increase of 6% for both.

The builder sold more homes thanks to strong consumer confidence and low borrowing costs, it said. First-quarter mortgage approvals were 18% higher than in the previous year, Persimmon said, adding that approvals during April and May also rose from last year, despite a period of increasing uncertainty leading up to the U.K.'s referendum on European Union membership in June.

Still, house-builders' shares fell on Tuesday, as investors reacted to Standard Life Investments' decision to suspend trading for its GBP2.9 billion U.K. commercial real-estate fund.

On Monday, trading in the fund for commercial real estate including office, retail and warehouse properties, as well as its associated feeder fund, was halted after a number of investors pulled their money out in the wake of the Brexit vote.

Investors may be incorrectly interpreting the decision by Standard Life, said Anthony Codling, Jefferies' house-building analyst. Mr. Codling pointed out that the fund deals in commercial rather than residential property.

On Tuesday, Aviva PLC (AV.LN) also said it was suspending dealing in its property market fund, citing "extraordinary market circumstances."

Persimmon's shares fell as much as 7.6% to 1,326 pence. Peers such as Taylor Wimpey PLC (TW.LN), Barratt Developments PLC (BDEV.LN), and Berkeley Group Holdings PLC (BKG.LN), also took hits on Tuesday. Their shares fell as much as 3.8%, 6.9% and 6.5% respectively.

The decline in shares is also caused by investors worrying about house-builders being unable to fulfill dividend obligations, said Mr. Codling. Investors are concerned about a reduction in housing transactions as the U.K. leaves the European Union, and therefore about house prices falling, he said.

Jefferies recommends holding the builder's shares, with a target share price of 1,669 pence.

In February, Persimmon increased the total value of capital to be returned to shareholders by GBP860 million, or GBP2.80 a share, to GBP2.76 billion, or GBP9 a share, to be paid between 2012 and 2021.

Mr. Codling said Persimmon has the flexibility, financial strength and landbank length to continue with its cash-return plan, and he continues to believe that the company's dividends are "strongly underpinned."

At June 30, Persimmon held GBP462 million of cash, compared with GBP278 million a year earlier.

Analysts from Liberum Capital encouraged buying house-builders' shares, saying they see "value in the sector" even though the industry is "only for the brave" right now.

"We think that shares across the sector have over-reacted since the EU referendum, if our central case proves roughly right," said Charlie Campbell, Liberum's house-building analyst.

Liberum also recommends holding Persimmon stock, with a target share price of 1,486 pence.

Persimmon shares at 1240 GMT were down by 5.7% at 1,353 pence, valuing the company at GBP4.17 billion.

Write to Olga Cotaga at olga.cotaga@wsj.com, Twitter @OlgaCotaga

(END) Dow Jones Newswires

July 05, 2016 09:59 ET (13:59 GMT)

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