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The rapid recovery in the UK housing market since the Covid-19 outbreak, fuelled by the government’s stamp duty cut and help-to-buy scheme, has boosted profit expectations at Taylor Wimpey, Britain’s third-biggest housebuilder.
Unlike during the first national lockdown in the spring, when most construction sites around the country shut for several weeks, the construction sector has been encouraged to keep going during the November lockdown in England.
Taylor Wimpey said all its sites were fully open and that it was continuing to hold customer appointments in its sales centres and show homes. Early signs suggested that customers wish to go ahead with purchases, it said, although cancellation rates are slightly higher than usual, at 20% in recent weeks compared with 15% last year.
“The quick recovery of the housing market is testament to the underlying strength of demand and supportive lending backdrop,” said Pete Redfern, the Taylor Wimpey chief executive. “Despite the wider uncertainty, underlying demand continues to be resilient, supported by very low interest rates.”
Taylor Wimpey expects operating profits this year to reach the top end of forecasts, which range from £242m to £292m, far below last year’s £850.5m. For next year it expects profits to be “materially above the top end” of current estimates, which range from £359m to £626m. Its £3bn order book comprises 11,530 homes, up from 10,486 this time last year.
Barratt, Britain’s biggest housebuilder, has also reported a jump in sales since lockdown restrictions eased in May. The market has been helped by the suspension of stamp duty on sales of properties up to £500,000 until March 2021, announced by Rishi Sunak in July.
The help-to-buy initiative has also been a big boost to housebuilders in recent years. It has allowed people to buy new-build homes with a deposit of 5%, with up to 20% of the property’s sale price covered by a government loan. From next April, help to buy will only be available to first-time buyers and it is due to end in March 2023.
Aynsley Lammin, an analyst at Canaccord, said: “Stable markets into 2021 are arguably still a big assumption but confidence in delivering strong profits against that outcome has increased. The increased confidence has led to the group assertively re-entering the land market post the equity raise.”
Taylor Wimpey shares rose almost 19% to 146.6p, although they are still below their level at this time last year, of 169.25p.
The housebuilder raised £510m from investors in June and has been buying more land with the proceeds, seeking to take advantage of depressed prices. It snapped up 70 sites with 14,500 plots, taking its land bank to 78,000 plots.
As part of cost cuts, the company is taking out a tier of operational managers, resulting in 100 job cuts out of its 6,000-strong workforce.
Source: The Guardian
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