Taylor Wimpey signals a recovery in demand from homebuyers as mortgage rates begin to fall
- Taylor Wimpey said deliveries will ramp up further in the second half of 2023
- The homebuilder expects to complete 9,000 to 10,500 homes this year
Taylor Wimpey signals a recovery in demand from homebuyers and completions are expected to pick up further in the second half of 2023.
Rising borrowing costs and a deteriorating economic climate have depressed the housing market, driving house prices lower and putting pressure on builders’ margins.
But Taylor Wimpey told investors that, while accounting for broader macroeconomic uncertainties, demand has recovered from the weakness in the last quarter of 2022, when Kwasi Kwarteng’s mini budget led to a sudden spike in mortgage rates.
Demand from homebuyers was encouraged by lowering mortgage rates
The closely monitored Rics survey of chartered surveyors earlier in April found that home prices and sales levels, as well as new listings and buyer demand, remained sluggish over the past month.
However, the study showed signs that the picture seems to be improving.
In March, Taylor Wimpey announced huge profits, but warned of a much weaker order book.
The company now expects to complete 9,000 to 10,500 homes by 2023, equivalent to an annual net sales assumption of 0.5 to 0.7, “with completions weighted more toward the second half.”
Taylor Wimpey chief executive Jennie Daly said: “We have seen a continued recovery in demand from the low levels towards the end of 2022, supported by good mortgage availability, and we have seen a gradual improvement in the sales rate as the sales season moves into spring progressed. ‘
The group added: ‘While challenges remain for our customers, especially start-ups, targeted marketing spend has enabled us to maintain customer interest at a healthy level.
“There is a continued commitment from mortgage lenders to provide loans with good product availability and reduced rates from the highs of Q4 2022.”
Taylor Wimpey’s net private sales rate for the year ended April 23 was 0.75, down from 0.97 last year, with a cancellation rate of 15 percent compared to 14 percent in 2022.
The company highlighted its “high-value” land bank as a “differentiator,” telling investors it remains “very selective in our land additions” with fewer than 500 new lots approved this year.
It told investors that while construction cost inflation remains high, it is “starting to ease from the 9 to 10 percent reported in March, a trend the group expects to continue “as the year progresses.”
Taylor Wimpey is targeting annual cost savings of £19m, but will spend £8m in 2023 to achieve this.
It said: ‘These changes do not affect our existing market coverage, ability to provide high quality products and services to our customers or ability to take advantage of market opportunities as they arise.’
Taylor Wimpey shares were up 0.2 percent in early trading to 125.85p.
Daly said, “While we remain cautious about continued macroeconomic uncertainty, Taylor Wimpey is a strong and flexible company distinguished by our high-quality land bank and experienced teams with a sharp focus on operational discipline.
“On behalf of the wider management team, I would also like to take this opportunity to thank Irene Dorner who is stepping down as chairman today.
“We look forward to welcoming Robert Noel to the role, who brings more than 30 years of experience in the real estate industry.”