PERSIMMON Homes is to split its North-East division in the New Year to capitalise on continued strong growth in the new property market.

The company, based in York, will start a Teesside offshoot firm in Newton Aycliffe, County Durham, on New Year's Day.

Jeff Fairburn, managing director of Persimmon Homes North-East, said: "The growth we have had in the North-East and the land we have going forward means we really need to split the company in the North-East in two to give a platform to succeed."

Persimmon already has a strong presence in the region, with developments ongoing at Ingelby Barwick, on Teesside, Redcar, and Middle Warren, in Hartlepool. Persimmon Homes Teesside will cover County Durham, Derwentside, Easington and the wider Teesside area.

Demand for Persimmon properties since June has remained robust and sales strong - despite talk by commentators of a slowdown in the housing market.

The increase in interest rates to 3.75 per cent last month had "no discernible effect" on demand for its new homes.

Analysts expect Persimmon to report pre-tax profits before exceptional items of £331.8m for the year to December 31 compared with £267.6m last year. Persimmon shares rose one per cent, or 4p, to 473p by the close.

Planning delays are continuing to frustrate the housebuilding industry, with the completion of Persimmon homes nine per cent lower in the first half of the year compared with a year ago.

Despite this, demand for houses appears to be as strong as ever. Prices are set to rise by eight per cent next year, according to the Halifax.

Britain's biggest mortgage lender said low interest rates, high employment levels and good affordability, which had underpinned the market during the past two years, looked set to continue into 2004.

But the figure is considerably lower than the 14.1 per cent by which prices have risen during the year to the end of last month.