Taylor Wimpey’s share price rises as it says there is a healthy backdrop to UK housing market and reports sales rates up against last year
Taylor Wimpey is optimistic about the UK housing market, even with the prospect of an interest rate rise next year. Today it said it expects to improve its operating profit margin in 2015.
Britain's second largest housebuilder said sales rates for the year to date are ahead of last year, at 0.76 sales per outlet per week. For the first half, sales rates were 22 per cent above the 2014 equivalent period.
Cancellation rates for the year to date remained low, at 12 per cent.
Build costs increased five per cent during 2015. However, the company added those increases were more than offset by sales price growth.
Taylor Wimpey's share price rose 1.32 per cent as markets opened on the news.
Why it's interesting
Taylor Wimpey expects to deliver an "improvement in operating profit margin of over 200 basis points in 2015 and a return on net operating assets of over 25 per cent", due to increasing consumer confidence, itself improving on the back of rising real wages.
The housebuilder said the UK housing market has continued to be very positive, as consumer confidence is leading to "increased sales and healthy sales price growth".
Read more: Taylor Wimpey confident on 2015 housing market outlook
Taylor Wimpey struck a positive tone, saying "with the higher than expected sales rates and resulting order book, outlets are generally closing slightly earlier than planned".
While build costs have increased, weighed towards labour costs, this has been offset by price growth, and Taylor Wimpey expects to see a slightly reduced level of build cost increase during 2016 to that experienced in 2015 as "more capacity returns to the sector, including through our apprentice, management and graduate trainee schemes".
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While it is expected that interest rates could be raised by the Bank of England as early as next year, the housebuilder also thinks that consumers have resilience to future interest rate movements.
The positive outlook stands in contrast to that of estate agents, such as Countrywide, which previously warned on profits as property sales after the General Election had not picked up. Countrywide blamed the profit warning on a slowdown in the housing market.
What Taylor Wimpey said
Pete Redfern, chief executive, said:
We have seen an excellent summer selling season strengthen further in the autumn period, with customer confidence high and demand underpinned by rising real wages and good access to a wide range of mortgage products.
As we look forward, 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.