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Taylor Wimpey has underscored a revival among UK housebuilders as the sector shrugs off wider economic concerns to report increases in revenues and margins.
Despite stagnant house prices and a fall in construction activity to its lowest level in three years in June, leading housebuilders including Persimmon, Berkeley and Taylor Wimpey are benefiting from sales of homes built on cheap land bought in the downturn.
Provided the market remained “stable”, it should deliver a performance in line with analysts’ expectations, Taylor Wimpey said on Wednesday. The consensus forecast is for full-year operating profit to rise about 30 per cent to £207m year on year. It expects margins in the first half to have risen to 11 per cent from 8.6 per cent in the first half last year.
Charlie Campbell, analyst at Liberum Capital, said: “The market is probably as good as it has been since 2008. Industry output is roughly half what it was before the recession, but the prices achieved are higher because they have adjusted their mix.”
Housebuilding was one of the worst affected sectors during the recession of 2008-09, with projects mothballed and a large numbers of construction workers laid off. A collapse in sales and big writedowns on land values forced companies to restructure and the industry almost halved in size.
The scale of the turnround was signalled on Friday when Berkeley, a London-focused house builder, said pre-tax profits rose two-thirds to £158.5m in the 12 months to April as it sold more homes at higher prices. Persimmon, the UK’s largest by revenue, reported a strong spring sales season on Tuesday, with revenues boosted 13 per cent in the first half.
Housebuilders have been raising margins by refocusing on the buoyant south-east property market and shifting from building cheaper apartments to family homes. They have also benefited from government schemes to increase access to mortgages. In April the government launched a scheme that helps people buying a new-build home to borrow up to 95 per cent of its value. Taylor Wimpey said that accounted for 10 per cent of reservations since March.
As forecasts for housebuilders are upgraded, some analysts say stronger performances in other sectors will be recognised.
“I am expecting forecasts to be revised upwards for consumer-facing stocks including house builders and pubs, as expectations have been quite low and the general consumer backdrop is improving quite rapidly,” said Gerard Lane, equity strategist at Shore Capital. This might not apply to retailers affected by factors such as overcapacity and weather, he added.
“We should also see trading picking up in ‘real economy’ stocks in the FTSE 250 across sectors such as engineering and those exposed to export growth when they report results over the next couple of months.”