Rising build costs ‘fully offset’ by healthy house price growth, says developer

Rising construction costs caused by a surge in demand for materials and supply shortages have been “fully offset by healthy levels of house price growth”, according to developer Taylor Wimpey.

The housebuilding giant also said the market remained strong with no sign of cooling, despite the ending of the stamp duty holiday next month.

The group gave its upbeat assessment as it raised its full-year earnings outlook after bouncing back to a first-half profit, amid Britain’s booming property market.

Image: The pandemic has been a tailwind for the housing market, say analysts

The firm posted pre-tax profits of £287.5m for the six months to 4 July, against losses of £39.8m a year ago.

Taylor said it now expects full-year group earnings to beat market expectations – at around £820m – with home completions expected towards the upper end of its 13,200 to 14,000 guidance range.

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House prices and buyer activity have increased over the past year due to the stamp duty holiday and people’s response to the coronavirus pandemic, including the trend for working from home.

The firm joined rivals in flagging increased costs, which are having an impact across the construction industry.

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It said: “The sector has seen increased build cost and supply chain pressure in relation to some materials in the first half of 2021, however this is being fully offset by healthy levels of house price growth.”

Demand also remained buoyant despite the phasing out of the stamp duty relief, which will return to the original threshold at the end of September, according to Taylor Wimpey.

The company said: “The UK housing market remains strong, underpinned by low interest rates, good mortgage availability and government support for customers.

“There have been healthy levels of customer interest in reservations extending well beyond the end of the stamp duty land tax holiday,” it added.

It said its private homes developments were around 99% forward sold as of 1 August, up from some 97% a year earlier and 87% two years ago.

Taylor Wimpey’s results also confirmed a £125m charge for remedial works on potentially unsafe cladding on apartment blocks in the wake of the Grenfell Tower tragedy.

The group said in March it would set aside the cash to fund the replacement of cladding and other fire safety work on all its developments built in the past 20 years.

Responding to the company’s half year results, Laura Hoy, equity analyst at Hargreaves Lansdown, said: “Another set of strong results from the UK’s housebuilders adds to mounting evidence that the pandemic has been a tailwind for the housing market.

“Turns out being locked inside for months on end has caused many people to re-evaluate their current living situation.

“Add to that the rising popularity of working from home, and you have the perfect excuse to move house.

“Over the past few months, there’ve been mutterings of a potential slowdown in the UK’s red-hot housing market -Halifax reported a small decline in house prices in June – but from Taylor Wimpey’s perspective things are still ticking over nicely.”