Shares in UK housebuilders rose on Thursday after Persimmon said it thought conditions in the sector were beginning to stabilise.

Mike Farley, chief executive, said trading had not worsened since a big downturn in April. Although pre-tax profits fell 64 per cent to £100.1m and the group slashed its dividend by more than two-thirds, Persimmon’s shares closed nearly 10 per cent stronger at 327p.

Shares in other housebuilders were boosted by Persimmon’s comments. Barratt Developments enjoyed the biggest improvement, with its shares ending 13.75 per cent stronger at 128¼p. Taylor Wimpey’s were up 2.42 per cent to 42¼p, while Bovis Homes rose 3.45 per cent to 412¼p. Bellway saw a 7.60 per cent improvement to 566p, while Berkeley ended 1.37 per cent up on 816½p.

However, Alistair Stewart, a bearish housing analyst at Dresdner Kleinwort, said short-covering in Persimmon, Barratt and Taylor Wimpey shares had fuelled the surges in their share prices, taking the rest of the sector with them. Mr Stewart said he disagreed with Persimmon management’s comments in the analyst conference call that the housing market was “bumping along the bottom”.

“We think the real pain has only just begun and rivals will be more bearish in their statements,” Mr Stewart said.

Persimmon said the first-half performance was good, even though all its key numbers were dramatically worse. New house sales fell by almost a third to 5,101, against the same period last year, with the average selling price also taking a knock, at £181,485 against £189,255. The operating margin was down from 20.8 to 14 per cent.

The half-year dividend was cut from 18.5p to 5p, payable from earnings per share down 63 per cent to 24.1p. Persimmon expects to generate £200m in free cash in the second half to help pay down debt. Mr Farley said that providing market conditions do not deteriorate further, the balance sheet should strengthen over the next 12-18 months.

Like many of its peers, Persimmon has taken a conservative approach to replenishing its land bank, resulting in a 7 per cent reduction to 76,159 plots. It also wrote down the carrying values of its land by £40m.

Mr Farley said cancellation rates had settled back from a recent high of more than 40 per cent to about 33 per cent.