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LONDON (Alliance News) - UK housebuilder Taylor Wimpey PLC Thursday said it had experienced a strong first few months of the year, with the market improving in all regions of the UK thanks to the government's mortgage financing scheme as well as a general improvement in availability of affordable mortgages.
Just a day after rival Persimmon PLC reported a further jump in home sales at higher average prices, Taylor Wimpey said it had experienced higher sales rates, a jump in its order book and higher selling prices in recent months. It also gave a bullish outlook, predicting margin improvements this year and next.
The housebuilders have seen a fast recovery in the market over the past year, after several years in which the market came almost to a standstill in the wake of the financial crisis and the ensuing economic downturn. Activity and prices in the UK housing market have been growing strongly, leading to a recovery in housebuilder stocks, but also to fears that the market may be becoming overheated already.
Housebuilders have thanked the UK government's Help to Buy scheme for helping fuel the recovery. The first part of the scheme, which is now a year old, makes buyers of newly built homes eligible for a 20% equity loan from the UK government on top of their 5% deposit. It has been extended by four years to 2020. The second phase, which has not been extended, started in the Autumn last year and guarantees a portion of a buyer's mortgage of new and existing homes.
Taylor Wimpey said it has worked with over 1,600 customers to buy a home using Help to Buy so far in 2014.
The housebuilder said it had achieved 0.75 sales per outlet per week so far in 2014, up from 0.66 in 2013, and it expects sales rates for the year as a whole to be "slightly" ahead of 2013. Like Persimmon, it said cancellation rates had continued to fall, reaching a "historical low" of 10.0%, from 13.7% last year.
Its total order book volume is up 13% on the year to 8,139 homes, while the value of the order book is up by a third to about GBP1.6 billion. Its average selling prices in the private order book are up to about GBP248,900, from GBP204,800.
"The positive momentum in the UK housing market has continued since our results in February and we have had a strong first quarter, with continuing improvement across all regions," the company said in its statement ahead of its annual general meeting.
"This market has been driven by better access to mortgages at more affordable rates, which has improved with increased competition between mortgage providers. This, together with the extension of Help to Buy, has given more customers both the confidence and the ability to step onto or move up the housing ladder," it added.
Taylor Wimpey said land prices have started to rise, but it was still buying land because it was able to do so at margins above historic norms. Its short-term land bank stood at about 73,000 plots at the end of March after it converted about 4,800 plots from its strategic land bank. Its strategic land bank has about 110,000 potential plots.
"Inevitably the better market has resulted in ongoing pressure on build costs and labour, particularly in some geographic areas, however this continues to be held at a manageable level," the company said, again echoing comments made be Persimmon.
"We remain confident that our disciplined strategy will deliver at least 200 to 300 basis points of operating margin improvement in 2014, and further improvement in 2015 and beyond," the company said in its outlook statement.
It said its net debt stood at GBP130 million at the end of March, down from GBP195 million a year earlier.
Taylor Wimpey shares were up 0.8% at 107.9 pence early Thursday.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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