Taylor Wimpey pointed to signs of improvement in the house market today, as it became the latest major name in the industry to reveal the impact of the 2023 sales slowdown.
The FTSE 100 developer reported a 43% drop in profit for the year of £474 million after revenue fell by over a fifth to £3.5 billion. The declines came as rising interest rates made mortgages less affordable, constricting demand for houses.
But average selling prices continued to rise. On private completions at Taylor Wimpey, it was up 5.1% to £370,000 and the overall average selling price rose 3.5% to £324,000.
Chief executive Jennie Daly said the UK’s housing market was facing what she called the “real problems of significant and chronic under-supply of new housing in this country”, as prices rose even with demand faltering.
But she explained that the overall increase in average prices came due to the “mix” of stock, “from one bed all the way up to six bedroom homes” and from across “geographical areas”, adding:
“Underlying house prices, on a like-for-like basis, have actually fallen. From the peak, we’re down by about 3%.”
The developer of Greenwich’s Millennium Village cut total costs by around £19 million in line with the market conditions. It built 10,848 homes in 2023, down from 14,154 in 2022 and will finish between 9,500 and 10,000 this year.
In the London market, sales rates remained strong in central London developements, including at its Farringdon site, branded as Postmark, where there will be over 680 homes once it is finished, split between the EC1 and WC1 postcodes on parts of the Mount Pleasant site sold off by Royal Mail.
With the spring selling season underway, Daly said: “We’re seeing improved customer confidence, which has been supported by reduced [mortgage] rates after the Christmas period. But there is still hesitancy, and levels of concern over affordability.”
Ahead of Jeremy Hunt’s Budget next week, Daly also said she would be watching for “anything the Chancellor can do to support first-time buyers” which would be healthy for the whole housing market, not just new homes”.
She also said: “On the supply side, we’d like to see more deliverable action on government on the planning issues that we have.” The firm will “fully co-operate” with regulators at the Competition and Markets Authority looking into allegations that housebuilders have shared commercially sensitive information, including on sales prices.
Aarin Chiekrie, an analyst at Hargreaves Lansdown, said Taylor’s numbers were a “resilient showing given the difficult market conditions of 2023”. Looking ahead, he added: “A combination of real house price declines and lower mortgage rates have helped to ease some of the affordability pressures for buyers since the beginning of 2023, and these trends appear to have carried into the new year.”
City experts also pointed to the optimism the trading update. Richard Hunter, head of markets at Interactive Investor, said there were signs “the tide could be turning”, as falls in mortgage rates “given the likely interest rate cuts in the UK later this year should improve not only affordability but also consumer confidence more generally.”
Taylor Wimpey’s shares fell 5p to 136p, a drop of 3.5%. Hunter said the price reaction “is factoring in a lower level of revenue and profit in the absence of any sustained signs of recovery thus far”.
But he also said: “The market consensus of the shares as a ‘buy’ reflects not only that Taylor Wimpey is one of the preferred plays in the sector, but also that there is some embedded confidence in longer term prospects.”
