Taylor Wimpey, a rival developer Persimmon, has confirmed that it will build fewer houses in 2015 in response to sharp drop in demand from potential buyers since September’s mini budget.
According to the FTSE 100 group, there have been “some signs” of improvement in recent weeks following a slowdown in housing market activity in the last months of 2013. Consumer confidence was impacted by spiralling mortgage rates, increasing political instability , and rising fears of a recession.
However, sales are still far below what they were last year. Taylor Wimpey sold more than one house per week on each of its 250 sites in the first part of 2022. Although it had fallen to 0.4 homes per semaine by the end, its sales rate has been increasing to 0.66 homes per săptămână in recent weeks.
The developer has built over 14,000 homes last year. It expects to build between 9,500 and 10,500 homes this year, assuming its sales rate remains the same.
This would result in a 36% drop in home completions at the bottom. Persimmon, another FTSE 100 developer, stated yesterday it would likely complete around 40% fewer homes this year.
Persimmon’s update yesterday dragged the stock market lower. Taylor Wimpey shares fell 1p or 1 percent to 117p this AM.
Taylor Wimpey was formed in 2007 by the merger of George Wimpey and Taylor Woodrow. It is a member the FTSE 100, with a stock capitalisation of PS4billion. It sold 14,154 homes last year for an average of PS352,000, 6 percent more than it achieved in 2021.
The year ended December 2012 saw revenue rise by 3.2 percent to PS4.42billion, an increase of PS4.28billion. Pre-tax profits rose to PS827.9million, an increase of 21.8 percent from the PS679.6million it generated in 2021. This is slightly higher than what the market expected.
Jennie Dly, Taylor Wimpey’s chief executive, said that 2022 was a year marked by “two distinct halves.” She said that while the economic outlook is not ideal, customers are still interested in our homes and trading, although it is early in the year has shown some improvement over the last quarter of 2022.
Taylor Wimpey’s profit margins will drop sharply this year, it is almost certain. Margins will also be under pressure due to the anticipated drop in completions.
Developers have been able in recent years to offset higher build costs through raising their asking prices. However, cost inflation remains at around 10 percent, but prices have not risen. According to City analysts, Taylor Wimpey is expected to report a pretax profit of approximately PS450 million in 2023. This represents a 46% decrease year-on-year.
Daly, 52 years old, stated that she and her team “acted quickly, decisively, to address rapidly changing market circumstances”. Taylor Wimpey also announced a series of job cuts, as well as slowing down build rates and reining back on land spend. She hopes that all of this will help save the group PS20 millions a year.