Taylor Wimpey records bumper annual profit following house price growth

Taylor Wimpey’s profits soared last year but the housebuilder has flagged a much weaker order book as the UK housing market continues to soften.

The housebuilding giant reported profit growth of 15.9 per cent to £643.6million as higher average property sale prices offset a slight drop in new builds and growing construction costs.

Trading for most of 2022 remained strong as Britons continued to take advantage of cheap lending to purchase new homes, despite inflationary pressures and successive interest rate hikes by the Bank of England.

Positive: Taylor Wimpey reported profit jumped by 15.9 per cent to £643.6million as higher average property sale prices offset a slight drop in new builds and growing construction costs

But former Prime Minister Liz Truss’s controversial ‘mini-budget’ in September led to soaring mortgage rates, further sapping consumer confidence and severely impacting new home sales.

Even with mortgage rates improving in recent months, Taylor Wimpey said its weekly net private sales rate as of last Sunday was 0.62 per outlet, compared to 1.02 at the equivalent period last year.

Meanwhile, its forward order book, not counting joint ventures, was £1.94billion and 8,078 properties, against £2.9billion and 10,934 houses the previous February.

The FTSE 100 company warned it could finish constructing more than a third fewer homes this year under current market conditions and planning restrictions.

‘As previously announced, our reservation rate is significantly lower than in recent years as affordability concerns weigh, particularly for first-time buyers, and we have reflected this in our build programmes for the year,’ the firm told investors. 

Fellow housebuilder Persimmon said on Wednesday that it might construct as few as 8,000 properties in 2023, having assembled more than 14,000 last year.

On the same day, figures from Nationwide Building Society showed that UK house prices dropped by 1.1 per cent in the 12 months ending February, the first annual fall in about a decade.

The Bank of England also revealed that the number of mortgage approvals in January declined for the fifth successive month to its lowest level since the 2008/09 global financial crisis.

Victoria Scholar, Interactive Investor’s head of investment, said the homebuilding sector was ‘facing a perfect storm from weak consumer confidence, the fallout from last year’s mini-budget chaos, declining real wages, rising mortgages rates on the back of the Bank of England’s tightening path and softening house prices’.

Yet Taylor Wimpey’s strong Covid-era performance has left it in a healthy financial position, with net cash of £863million in December even after handing £474million to investors via dividends and share buybacks during the year.

Taylor Wimpey shares were down 0.25 per cent at 118.45p on Thursday morning, meaning they have slumped by about 39 per cent since the pandemic began.

This post first appeared on Dailymail.co.uk