- Taylor Wimpey reported profits plummeting 45.8% to £349m in 2023
- The firm completed the construction of 10,848 homes, 23% less than the previous year
- Higher mortgage costs are slowing the volume of new home purchases
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Taylor Wimpey’s profits almost halved last year due to rising construction costs and a drop in new home completions.
The housebuilding giant’s profits plunged 45.8 per cent to £349 million in 2023 as it finished building 10,848 properties, down 23 per cent on the previous year.
While average sales prices for FTSE 100 firm homes rose 5.1 per cent to £370,000, this was outweighed by underlying construction cost inflation which expanded by around 8.1 per cent.
Profitability: Taylor Wimpey’s profits almost halved last year due to rising construction costs and a significant drop in new home completions.
Taylor Wimpey expects to build even fewer homes this year (between 9,500 and 10,000, excluding joint ventures) due to difficult market conditions.
Britain’s housebuilding industry has been hit by higher mortgage costs which have slowed the volume of new home purchases.
After soaring following the former Liz Truss’ controversial mini-budget, mortgage rates eased slightly in early 2023 but rose throughout the spring and summer due to worse-than-expected inflation.
House sales have been further hit by rigid planning rules, the end of the Help to Buy scheme and considerable cost of living pressures.
As of February 25, Taylor Wimpey’s order book stood at £1.95bn and 7,042 homes, up from £2.15bn and 8,078 homes at the same time last year.
But while the Buckinghamshire-based group expects to build fewer properties in 2024, it said trading was showing “encouraging signs of improvement”.
Lower mortgage rates are improving affordability and consumer confidence, leading to reduced charge-off rates and a weekly net private sales rate of 0.67 per store so far this year, versus 0.62 from the previous year.
Jennie Daly, chief executive of Taylor Wimpey, said: ‘It is still early in the year and the macroeconomic backdrop remains uncertain; However, it is encouraging to see some signs of improvement in the market.
“Looking ahead, we are well positioned in an attractive market, with significant underlying demand for our quality homes, and we are poised for growth from 2025 onwards, assuming favorable market conditions.”
Taylor Wimpey’s annual results come two days after the UK competition regulator launched an investigation into the company and seven other housebuilders amid accusations of sharing commercially sensitive information.
The Competition and Markets Authority (CMA) will investigate whether new-build home prices are too high because some of the sector’s biggest operators share non-public business knowledge.
In addition to Taylor Wimpey, the CMA is investigating Barratt Developments, Bellway, Berkeley Group, Bloor Homes, Persimmon, Redrow and Vistry.
It announced the new research by publishing a 12-month study of the British housing market, which blamed the shortage of new homes on a “complex and unpredictable” planning system and the limitations of private speculative development.
“Any reform to the current system would likely be a tailwind that would benefit the entire sector,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
taylor wimpey actions They were down 2.9 per cent at 136.45p just before midday on Wednesday, but have still risen around 11 per cent in the last 12 months.