One of Britain’s biggest housebuilders, Taylor Wimpey, has warned that the Bank of England’s rate rises to tame high inflation have weakened the housing market and made homes less affordable after a sales slump.
Revenue fell 21% to £1.6bn in the six months to 2 July, dragging pre-tax profit down 29% to £237.7m. Its average selling price rose 6.7% to £320,000.
In July, the builder’s net sales rate for private homes dropped to 0.47 an outlet per week, compared with 0.57 last year, while the cancellation rate rose to 24% from 19% as more customers pulled out of deals.
“However, market conditions weakened in the second quarter as the Bank of England responded to higher than expected inflation by increasing the base rate from 4.5% to 5% in June, which drove an increase in the cost of mortgages towards the end of the half,” Daly said.
On Tuesday, Nationwide building society reported that UK house prices fell at the fastest annual rate in 14 years last month, as higher interest rates hindered people’s ability to buy a property with a mortgage. Economists are expecting the market to decline further this year.
Taylor Wimpey’s order book contained 7,866 homes worth £2.1bn, excluding joint ventures, in early July compared with 10,102 homes worth £2.8bn at the same time last year.
The group completed 5,120 homes in the first half of this year, down from 6,922 a year earlier.
On a brighter note, the rate of material and labour cost inflation has eased, with build cost inflation on new tenders now about 6% compared with 9% to 10% at the start of the year. Taylor Wimpey expects this to reduce further over the coming months.