BT : Sales holding up but outlook cautious: UK housebuilder

Business Times - 29 Jun 2010

Sales holding up but outlook cautious: UK housebuilder

(LONDON) British housebuilder Taylor Wimpey plc said sales had held up in the first half of the year, but could offer little reassurance for the full year as consumer confidence remains depressed.

Taylor Wimpey, the first volume housebuilder to update investors since the UK general election and subsequent emergency budget, said sales had been dented in the second quarter as consumers delayed making big ticket purchases around the poll.

But the UK's third-largest housebuilder by market value said sales had recovered in recent weeks, echoing comments from luxury apartment developer Berkeley Group on Friday.

This will give some comfort to the sector, which has been struggling to regain a sure footing after the downturn knocked building activity, caused many builders to turn to shareholders for cash and wiped a fifth off property values.

But low mortgage availability - especially for first time buyers - and broader macro-economic uncertainty is denting short-term confidence in the sector.

'With ongoing political and economic uncertainty, we continue to run the business on a cautious basis, with selective land investment and an ongoing focus on costs and cash,' said Taylor Wimpey in a statement.

The company's comments come after a survey by mortgage lender Nationwide showed UK consumer confidence was at its lowest level in almost a year in May, reflecting concerns about the UK economy and unemployment which is set to rise sharply in the wake of government spending cuts.

House prices fell 0.4 per cent in May according to mortgage lender Halifax, while Nationwide reported a 0.5 per cent rise for the month, half the rate of the previous two months. The Land Registry said prices had fallen 0.2 per cent on the month.

Further pain may be on the cards as the government looks to reform the planning system. Taylor Wimpey said any change needs to be implemented with a clear transition period and with regard to cultural change.

The reform of the planning system - aimed at giving greater power to the local areas - is causing a headache for the building sector as some local authorities have already put planning decisions on hold until there is greater certainty from the coalition government.

Taylor Wimpey said it expects to complete 4,650 homes in the first half at an average selling price of £167,000 (S$350,000). This compares with 4,702 homes at an average selling price of £153,000 in the same period last year.

Taylor Wimpey, the most highly geared UK housebuilder with net debt of £650 million, said trading in the US market was volatile in the year-to-date, but it sees 'a steadier, clearer picture' towards the end of the year. -- Reuters

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