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Good news comes in the absence of terrible news. Taylor Wimpey, the housebuilder, anticipates operating profits between £440mn-£470mn this year, which represents a 50% decrease compared to 2022, but it surpasses expectations.
Uncertainty remains regarding the impact of higher mortgage rates on home sales in Britain, as recent survey data has been mixed. Taylor Wimpey’s half-year results offer hope that a significant price crash is unlikely.
The company states that underlying customer interest remains strong, and they expect to construct between 10,000 and 10,500 homes this year, reflecting the higher end of their previous guidance.
Customers determined to enter the property market or upgrade their homes try to navigate higher mortgage rates by opting for longer-term loans. Moreover, supply chain inflation, which previously stood at 9-10%, has now moderated to an annual rate of around 6%.
These signs of resilience provide some relief amidst otherwise challenging results. Completions decreased by 26% to 5,120, impacting operating profits. Falling sales in the past four weeks have elevated the cancellation rate from 19% to 24% compared to last year.
The outlook for Taylor Wimpey’s future in 2024 remains uncertain, with various variables clouding the picture. On a positive note, some lenders have decreased the cost of home loans, potentially increasing buyer demand. However, planning issues continue to be a challenge.
Despite the market turbulence, Taylor Wimpey’s shares have risen by 2% year to date. Housebuilders have historically performed well when investors buy during downturns. However, Taylor Wimpey’s forward price earnings multiple of over 12 times is higher than peers like Barratt Developments, which trades at a multiple of 8.5 times. Investors willing to endure short-term housing market challenges may find cheaper real estate opportunities in other sectors.
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