Taylor Wimpey mulls planning overhaul as high interest rates hit profits

Taylor Wimpey expects to build up to 10,000 homes this year on the back of a second-half recovery after high interest rates hit demand and hit profits in the first half.

The FTSE 250 housebuilder posted a 22.6 per cent drop in operating profit to £182.3m for the six months ended June 30, with sales down 7 per cent and house completions down around 7.7 per cent to 4,728.

Taylor Wimpey blamed “delayed interest rate cuts and comparatively high mortgage rates”.

However, it told investors that expectations of imminent interest rate cuts meant it was on track to meet full-year financial guidance and “the high end” of completions guidance of 9,500 to 10,000 homes.

Markets are divided over whether the Bank of England will opt for its first rate cut on Thursday after a two-year cycle of hikes, which has taken the base rate to a 16-year high of 5.25 percent and dampened demand in the housing market as mortgage rates have risen in tandem.

Taylor Wimpey’s average UK sales price at completion fell almost 1 per cent to £317,000 on the same period last year, which the company said was “due to both underlying price deflation and mix”.

As at 30 June, it had a total order book of 7,451 homes, excluding joint ventures, worth just over £2bn, up from 7,866 homes worth around £2.15bn last year.

Chief executive Jennie Daly described the result as a “strong financial and operational performance… in a relatively stable market environment.”

The group announced an interim dividend for 2024 of 4.8 pence per share, slightly higher than last year’s 4.79 pence and in line with its policy of returning 7.5 per cent of net assets annually.

Taylor Wimpey shares rose 2.5 percent to 162.55 pence in early trading, bringing their full-year gains to 42.6 percent.

Analysts believe Taylor Wimpey will benefit from urban planning reform

Taylor Wimpey also told investors it looked forward to “working constructively with the new government” and welcomed its “recognition… that planning is a significant barrier to economic growth, of which housebuilding is a significant component”.

The new Labour government has proposed changes to the National Planning Policy Framework as it prepares to meet national housebuilding targets of 370,000 homes a year.

Taylor Wimpey said: ‘While we expect the changes to take some time to have an impact, we see the planning reforms outlined by the new Government as key to unlocking land supply in the years ahead and investing in the skills and resources needed to support future housing needs.

‘We are well positioned for the medium term and have been actively preparing for planning changes and focusing on developing high-quality planning applications from the strategic portfolio.

‘We have around 30,000 applications in the planning process and additional applications ready to be submitted if we see the proposed changes to the grey belt come to fruition.’

And city analysts have noted that the company will stand out among homebuilders as a key beneficiary of any surge in home construction.

Anthony Codling, head of European housing and building materials at investment bank RBC Capital Markets, said Taylor Wimpey’s “extensive national presence” and “high-quality strategic land bank” put it in an “enviable position to take advantage” of planning reform.

He added: “The impact will not be seen overnight, but in our view those willing to be patient will be handsomely rewarded.”

John Moore, senior investment manager at RBC Brewin Dolphin, said: ‘The government’s commitment to building new homes and reforming the planning system could bring significant tailwinds for the housebuilding sector; Taylor Wimpey should be among the main beneficiaries.

‘With plenty of cash in the bank and a more stable environment, management may be looking to potential acquisitions after pulling out of a deal for Cala and continuing consolidation in the sector.’