Booming housing market buoys sales at Taylor Wimpey

UK housebuilding giant Taylor Wimpey yesterday hailed record sales amid a strong housing market, as its boss said buyer sentiment was strong enough to ride out any interest rate rises.

House prices have increased since September Picture: JP

After what the group described in a trading update as an “excellent summer selling season” it also predicted a sharp improvement in its full-year profit margins to about 20 per cent.

Taylor Wimpey said sales volumes for the year to date had increased 15 per cent, and its total order book now stands at £2.1 billion – £400 million higher than a year ago.

The company said that although building costs had risen about 5 per cent during 2015, the increase was more than offset by sales price growth.

Taylor Wimpey chief executive Pete Redfern said sales growth was being driven by high customer confidence and demand, underpinned by “rising real wages” and good access to a wide range of mortgage products.

He added that he did not believe the timing of any future interest rate rises by the Bank of England would have a major impact and that “consumers have resilience to future interest rate movements”.

Redfern said: “Against this backdrop, we are reporting record order book levels and expect to deliver an improvement in operating profit margin of over 200 basis points in 2015 and a return on net operating assets of more than 25 per cent.”

The new profit margin compares with 17.9 per cent seen in the last full year.

Redfern added: “We are particularly pleased to see that the tighter lending requirements are helping to ensure that monthly payments remain affordable and sustainable, which contributes towards a healthy outlook for both homebuyers and homebuilders.”

Taylor Wimpey, which has Scottish bases in Dunfermline and Paisley and more than 20 current developments north of the Border, said it was fully sold for its targeted 2015 completions and around 27 per cent forward sold for its expected 2016 private completions.

The company said that net cash at the end of this year would be around £220m, almost double the £113m seen at the end of 2014, placing it in a robust financial position.

Cancellation rates for the year to date continue to remain low at 12 per cent compared with 
13 per cent in the equivalent period in 2014.

Hargreaves Lansdown analyst Keith Bowman said the jump in second-half sales rates was “impressive”.

Bowman said: “Sales price growth is outpacing rising build costs, while ongoing cash generation is fuelling a continued shareholder cash return programme. The update reflects still highly solid consumer demand for new housing.”

And Chris Millington at Numis said the sales rate so far this year is “materially stronger” than forecast.

Shares in Taylor Wimpey – already up by 40 per cent this year – closed up more than 4 per cent, or 7.1p, at 180.9p.