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UK housebuilder Taylor Wimpey gave the latest sign of improvement in the country’s housing sector on Thursday, with an optimistic update on its profits.
The FTSE 100 group said it expects annual operating profits of close to £470mn, the high end of its guidance, although this would still be down almost 50 per cent from record levels in 2022.
Its update comes this same week as rival developer Persimmon flagged “a strong pick-up” in home sales in October, while data from mortgage lenders Halifax and Nationwide showed month-on-month house price increases for the first time since the spring.
These positive signals come after the Bank of England paused its relentless run of interest rate increases. Stable borrowing cost will be a relief to the housing sector after fast-rising rates hammered house prices and demand from buyers.
Taylor Wimpey chief executive Jennie Daly said the real test for the market will come early next year, after the seasonally quiet winter and holiday period. “What we’re really looking out to now is the spring selling season,” she said.
Daly credited the good news on profits to cost discipline and careful management of supply to match demand and make sure the company did not have to “cut prices in order to liquidate”.
Incentives for buyers, such as free carpets and upgrades, averaged 5 per cent this year, she said. These perks are commonly used by housebuilders to encourage buyers without cutting prices. Taylor Wimpey shares rose around 2 per cent in early trading.
Analysts caution that stabilisation and recovery for housebuilders and the wider housing market will be slow. Andrew Bailey, BoE governor, said on Wednesday that interest rates needed to remain restrictive for an extended period of time.
Taylor Wimpey said it had yet to see an improvement in the pace of home sales compared with last year.
“Conditions remain difficult it is not going to be a sharp bounce back, but it increasingly looks like we are past the darkest days for the sector,” Peel Hunt analyst Sam Cullen said.
Halifax on Tuesday reported a 1.1 per cent rise in house prices between September and October, ending six months of decline, and echoing a similar report from Nationwide last week. Prices are still down 3.2 per cent compared with last October.
In forecasts on Wednesday, estate agents Savills said the UK housing market looks to be “past ‘peak pain’.” Lucian Cook, head of residential research at Savills, cautioned that “continued affordability pressures are likely to result in further modest house price falls over the first half of 2024, resulting in a peak-to-trough house-price adjustment in the order of -10 per cent.”
Mortgage rates have ticked lower with the average five-year fixed deal now at 5.35%, down from 5.92% this time last year, according to Rightmove.
