Taylor Wimpey is ‘positive but cautious’ for housing market

THE housing market was handed a boost by housebuilder Taylor Wimpey, which cited increasingly upbeat sentiment and rising sales.

The builder, Britain’s second-biggest by market value, said it is “positive (but) cautious” about the year ahead.

It pointed to more evidence the Bank of England’s Funding for Lending Scheme (FLS) is feeding through in the form of cheaper mortgages.

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The scheme, launched in August, offers banks and building societies cheaper funding if they increase lending to home buyers and businesses.

A separate survey from the Royal Institution of Chartered Surveyors also indicated higher home sales in 2013.

It said 22 per cent more surveyors in Yorkshire and the Humber region quizzed last month predicted sales will rise rather than fall over the next quarter.

Taylor Wimpey said 2012 operating profits surged more than 40 per cent on a year earlier, which analysts at J.P.Morgan Cazenove reckon implies pre-tax profits of about £180m.

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“Two weeks into 2013, consumer sentiment towards the housing market is more positive than we have seen in recent times,” said the company, headed by chief executive Pete Redfern.

“Clearly it is too early to judge the market for the year, but we maintain a positive, although cautious view in the short-term.”

It sold 10,886 homes during 2012, up seven per cent on 2011.

Taylor Wimpey said it started the year with 328 outlets, up from 314 a year earlier. In Yorkshire these include sites in Boston Spa, York, Barnsley, Bradford, Leeds, Sheffield and Wakefield.

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It had forward-sold 5,966 homes worth a total £948m at the start of the year. That was 14 per cent ahead of the same point a year earlier.

Rival Persimmon last week reported a similarly improving trend, with forward sales of £645m compared with £615m a year earlier providing a “healthy platform” for growth.

Listed peers Barratt Developments and Bovis Homes are expected to echo this trend when they report on trading later this week.

“Subject to ongoing stable market conditions, we anticipate a natural growth in completions in 2013, as our strong order book, land acquisition strategy and planning approvals on strategic sites organically increase our outlet numbers,” said Taylor Wimpey.

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Despite a sluggish housing market, Britain’s listed builders have been boosted by building on land acquired cheaply during the downturn. Combined with deep cost cuts and building more family homes instead of apartments, this has hiked margins and fuelled profits.

Taylor Wimpey said average selling prices on private completions increased by six per cent to £197,000 against a backdrop of broadly flat house prices in the wider UK market. Including social housing sales, its overall average selling price was £181,000.

The builder said operating margins will beat the 11.1 per cent it reported in the first half of 2012.

Net debt of about £60m in December compared with £135.2m in July 2012.

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Taylor Wimpey said it continued to see a “significant number of attractive opportunities in the (land) market” in 2012. It approved the purchase of 14,172 new plots on 112 sites in 2012, up from 11,756 in 2011.

The builder highlighted better conditions in the mortgage market. “While mortgage availability remains restricted, some major lenders have recently reduced their rates and we hope this trend will continue as the Funding for Lending Scheme gains traction,” it said.

The Government has also been attempting to stimulate the housing market through the FirstBuy shared equity scheme and NewBuy mortgage indemnity scheme. Taylor Wimpey said it helped customers buy 1,203 homes under FirstBuy scheme and 546 homes under the NewBuy and New Home schemes.

Analysts at Jefferies stockbrokers upgraded pre-tax profits estimates by five per cent for 2012 and six per cent for 2013. “The drivers of these changes are better than expected ASPs (average selling prices) on the new sites working through the landbank and increases in our volume estimates by 2.5 per cent per annum as government initiatives appear to be leading to some improvement in mortgage availability.”

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They added: “In our view the upgrades to our numbers are driven by land. New sites have higher margins. Due to the continued softness of the land market and limited competition for medium sized sites Taylor Wimpey is able to secure higher quality land, for a lower price than it could during the UK housing boom.”