Taylor Wimpey’s profits fall 46% as the number of new homes falls

  • Taylor Wimpey reported its 2023 profits fell 45.8% to £349 million
  • The company completed construction of 10,848 homes, down 23% from the previous year
  • Higher mortgage costs reduce the volume of new home purchases

Taylor Wimpey’s revenues almost halved last year due to rising construction costs and a slump in the delivery of new homes.

The housing giant’s profits plummeted 45.8 per cent to £349m in 2023 as 10,848 homes were completed, down 23 per cent on the previous year.

While average sales prices of the FTSE 100 firm’s homes rose by 5.1 per cent to £370,000, this was outpaced by underlying construction cost inflation which increased by around 8.1 per cent.

Profitability: Taylor Wimpey’s revenues almost halved last year due to rising construction costs and a significant drop in new home deliveries

Taylor Wimpey expects to build even fewer homes this year – between 9,500 and 10,000, excluding joint ventures – due to challenging market conditions.

The UK housing sector has been hit by higher mortgage costs, causing the volume of new home purchases to fall.

After peaking following former Liz Truss’s controversial mini-budget, mortgage rates fell slightly in early 2023 but rose in the spring and summer on worse-than-expected inflation.

House sales have been further hit by strict planning rules, the end of the Help to Buy scheme and significant pressure on the cost of living.

As of February 25, Taylor Wimpey’s order book stood at £1.95 billion and 7,042 homes, compared to £2.15 billion and 8,078 homes at the same point last year.

But while the Buckinghamshire-based group expects to build fewer properties in 2024, the company noted that trading showed ‘encouraging signs of improvement’.

Lower mortgage interest rates improve affordability and consumer confidence, leading to falling cancellation rates and weekly net retail sales of 0.67 per point of sale so far this year, compared to 0.62 a year earlier.

Jennie Daly, CEO of Taylor Wimpey, said: ‘It is still early in the year and the macroeconomic backdrop remains uncertain; However, it is encouraging to see some signs of improvement in the market.

‘Looking ahead, we are well positioned in an attractive market, with significant underlying demand for our quality homes, and are poised for growth from 2025, assuming supportive market conditions.’

Taylor Wimpey’s annual results come two days after the UK Competition Authority launched an investigation into the company and seven other housebuilders over allegations of sharing commercially sensitive information.

The Competition and Markets Authority (CMA) will investigate whether new-build home prices are too high as some of the sector’s biggest players share non-public commercial knowledge.

In addition to Taylor Wimpey, the CMA is investigating Barratt Developments, Bellway, Berkeley Group, Bloor Homes, Persimmon, Redrow and Vistry.

It announced the new research as it published a 12-month investigation into the UK housing market, which blamed the shortage of new homes on a “complex and unpredictable” planning system and the limitations of private speculative development.

“Any reform to the current system would likely be a tailwind benefiting the entire sector,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

Taylor Wimpey Shares were 2.9 per cent lower at 136.45p just before midday on Wednesday, but have still grown by around 11 per cent over the past 12 months.