Taylor Wimpey records bumper annual profit following house price growth

Taylor Wimpey’s profits soared last year, but the homebuilder has signaled a much weaker order book as the UK housing market continues to deteriorate.

The housing giant reported profit growth of 15.9 per cent to £643.6 million as higher average property sales prices offset a slight decline in new construction and rising construction costs.

Trade remained strong throughout most of 2022 as Britons continued to take advantage of cheap loans to buy new homes, despite inflationary pressures and successive Bank of England rate hikes.

But former Prime Minister Liz Truss’s controversial ‘mini budget’ in September led to skyrocketing mortgage rates, further undermining consumer confidence and serious consequences for new home sales.

Even as mortgage rates have improved in recent months, Taylor Wimpey said the weekly net retail sales figure as of last Sunday was 0.62 per outlet, compared to 1.02 in the same period last year.

Meanwhile, the forward order book, excluding joint ventures, was £1.94 billion and 8,078 properties, up from £2.9 billion and 10,934 homes in February last year.

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

“As previously announced, our reservation rate is significantly lower than in recent years as affordability weighs heavily, especially for first-time buyers, and we’ve reflected this in our construction programs for the year,” the company told investors.

Fellow homebuilder Persimmon said Wednesday it may build just 8,000 homes in 2023, after building more than 14,000 last year.

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

The Bank of England also revealed that mortgage approvals fell for a fifth consecutive month in January to the lowest level since the global financial crisis of 2008/2009.

Victoria Scholar, Interactive Investor’s Head of Investment, said the housing sector “went into a perfect storm from weak consumer confidence, the fallout from last year’s mini-budget chaos, falling real wages, rising mortgage rates due to the Bank’s tightening of England.” path and falling house prices’.

Still, Taylor Wimpey’s strong performance in the Covid era has left the company in a healthy financial position, with a net cash position of £863m in December, even after handing over £474m to investors through dividends and share buybacks during the year.

Taylor Wimpey shares were down 0.25 percent at 118.45 p Thursday morning, meaning they’re down about 39 percent since the start of the pandemic.