The group - the first volume housebuilder to update investors since the election and subsequent emergency Budget - said the property market had shown an "encouraging level of stability" since April.
However, it warned a shortage of land with planning consent and potential changes to planning policy could "artificially constrain" a recovery in industry volumes.
The sector has been struggling to regain a sure footing after the recession-hit building activity caused many companies to turn to shareholders for funding.
In a statement to investors, Taylor Wimpey said: "With ongoing political and economic uncertainty, we continue to run the business on a cautious basis, with selective land investment and an ongoing focus on costs and cash."
Shares in the group dipped 2.5 per cent to 29.7p, while Barratt Developments fell 1.5 per cent to 102.9p, although sector peer Persimmon nudged up 1.7 per cent to 386.8p.
Taylor's cautionary comments come after a survey by mortgage lender Nationwide showed UK consumer confidence was at its lowest level in almost a year in May, reflecting concerns about the UK economy in the wake of public sector spending cuts and tax rises.
According to banking giant Halifax, UK house prices fell 0.4 per cent in May.
Taylor Wimpey said it was "concerned" over the coalition government's looming spending review, which might see the axe fall on housing initiatives and social housing grants. In 2009, one-sixth of the firm's 10,189 legal completions were affordable housing.
Across its UK housebuilding business, the group has now sold 83 per cent of its full-year target and stressed yesterday that its order book remained strong, although first-half completions will be slightly below 2009 at 4,650.
The company has completed a number of land deals in recent weeks as sellers rush to beat Budget hikes in capital gains tax.
Despite the uncertain outlook, however,some analysts were reassured by the trading statement.
In a note, analysts at analysts at Panmure Gordon said: "Taylor Wimpey's trading statement is broadly in line with expectations and should lend support to a sector which has been under significant pressure."