Housebuilders close door on six years of pain as prices jump
Thursday 04 July 2013
One of Britain's biggest homebuilders says nearly six years of pain for the housing market is at an end after the first major improvement in conditions since the financial crisis.
Taylor Wimpey says the housing market had "shown measurable improvement for the first time since the downturn of 2007-08". It gave the most bullish verdict yet on a market buoyed by an improving economy, easier lending conditions and the Government's Help to Buy initiative.
The upbeat comments, from the UK's second-largest player by homes completed and nearly a victim of the crash, sent investors piling into housebuilding shares as the City digested a raft of good news elsewhere in the sector. Rival Redrow provided surprise cheer for the sector in an unscheduled update flagging up profits "materially" ahead of market hopes and pushing the shares to a five-year high. Galliford Try is also on course for record results.
The buoyant state of the wider market was also underlined by the latest figures from lender Halifax, showing a bigger-than-expected 0.6 per cent rise in house prices last month as increased demand from buyers outstripped supply. Halifax said prices in the quarter to June were 3.7 per cent ahead of a year earlier, the biggest increase since August 2010.
Taylor Wimpey chief executive Pete Redfern said the company was selling about two homes every three weeks from each of its sites - a return to "normality" if not boom levels. He said: "This is the first time we have seen relatively normal sales rates. We're getting close to the normal average levels where we've been in the long term over the past 25 years. We've seen much more interest from first-time buyers as well as at the top end of the market."
The homebuilder was created in 2007 through a £5 billion merger at the peak of the housing boom, but almost sank under the weight of its £1.7 billion debts and took a £1 billion hit on the value of its land in 2008. But today it said conditions had improved to the extent that it could unwind some of the provision, meaning a profit windfall in the housebuilder's next results.
Anthony Codling at Jefferies said: "If ever we need proof that the housing market is recovering, we have it now. Whilst we expect the quantum to be small, the symbolism is quite the opposite."
Taylor Wimpey's shares added 3.75p or 4 per cent to 100.7p, while Redrow rose 10.7p or 5 per cent to 232.75p.
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