UK: Upturn in housing market boosts Taylor Wimpey, Redrow and Galliford Try
- Credit: Archant
The biggest improvement in the housing market since the start of the credit crunch has boosted profits and sales at a trio of housebuilders.
Taylor Wimpey plans to write back millions of pounds of value on its land holdings while Redrow said profits will beat expectations and Galliford Try said its results will break records.
Builders have been buoyed in recent months by improving consumer confidence, the brighter economy and Government stimulus schemes.
Taylor Wimpey said it will write back some of the value slashed from its UK business during the downturn, when it came close to collapse. It wrote down £904.4 million from its UK division in 2008 and £445 million in 2009.
Taylor Wimpey and Galliford Try hailed the impact of the Government’s Help to Buy scheme, which allows people to buy a home with a 5% deposit.
Chancellor George Osborne unveiled Help to Buy in March, which lends buyers 20% of the value of a new home worth up to £600,000, interest-free for five years.
This allows people to buy a property with a 25% deposit and together with another state stimulus programme, the Funding for Lending Scheme (FLS), has been credited with spurring a recovery in the housing market.
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The FLS incentivises banks and building societies to lend more by offering them discounted loans.
While Taylor Wimpey’s completed sales during the first six months of the year edged up 2% to 5,192 homes, its order book is up 35% on a year earlier to £1.3 billion, representing 7,101 homes. Help to Buy has been used to reserve more than of its 1,000 properties.
Its average private sales price is up 8.5% to £205,000, helping operating profit margins swell above 13% from 11.2% a year earlier.
Taylor Wimpey said: “We have been operating in a UK housing market that has shown measurable improvement for the first time since the downturn of 2007/2008.
“We consider this to be down to a general economic improvement, better mortgage availability and the direct impact of the Government schemes.”
Galliford Try said forward sales are 15% ahead at £313 million and its average private sale price is up 5% to £262,000. That will result in record results for the year to the end of June, it said.
Redrow said revenues were 26% higher to £604.8 million during the year to the end of June - resulting in pre-tax profits ahead of City forecasts of between £52.2 million and £61.6 million.
The builders’ buoyant trading echoes a recent upbeat statement from rival Persimmon, which said profit margins have soared to 15% a year-and-a-half ahead of target, while it has also sold out a number of developments sooner than expected.
Figures from the Bank of England recently showed mortgage approvals soared to their highest level in three-and-a-half years in May, with 58,242 mortgage approvals for house purchases. That was up from 54,354 in April and the highest level since December 2009.