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$4 Billion Golden Oppoerunity

Taylor Wimpey Reports £811m in Profits boosted by Help-to-Buy

Housing-Market / UK Housing Mar 10, 2019 - 09:04 PM GMT

By: Boris_Dzhingarov

Housing-Market The housing market slow down many feared resulting from the uncertainty of Brexit and been quelled by the United Kingdom’s low mortgage rates and its help-to-buy program. Housebuilders across the country have reported profits this year including Taylor Wimpey, and that signals a solid start to 2019.

Taylor Wimpey, the third largest builder in Britain, reported pre-tax profits of £810.7 million for the 2018 year on 15,275 house built. This was an increase of 19% and saw its shares rise by 3%, and that saw them becoming one of the top on the FTSE 100.




The chief executive, Pete Redfern stated that the company has not seen any decline relating to Brexit, despite an ongoing feeling of political and macroeconomic uncertainty. Redfern added that the start of 2019 has been very positive and is encouraging to see demand remain high for their homes. He further lamented that it would be naïve to not be concerned and the company is aware of short-term risks. However, the demand for housing in the U.K is such that it will not be affected by the long term.

Persimmon, a rival of Taylor Wimpey also reported strong profits of £1.09 billion this week for 2018. This was their biggest recorded profits ever and the largest ever reported by a home builder in Britain. That worked out to a per home sold profit of £66,265, whereas Taylor Wimpey’s per home profit was less coming in at £53,073.

The United Kingdom’s help-to buy program has been instrumental in homebuilder profits over the last five years. Taxpayer funded, it allows home buyers to finance new home purchases with only 5% down. It also will lend buyers equal to 20% of a home’s value without interest for five years. That amount increases to 40% if the home is located in London.

For Taylor Wimpey, that has resulted in 36% of its sales being the result of the program in 2018, down from 43% in 2017. The company reported that the average per new home sale price was £264,000, while in the private sector, the price averaged £302,000, which was a 2% increase over last year.

What is clear is that the program allows buyers to manage the cost of a new home more easily, and that has been a positive sign to the overall business community as a whole. One of those feeling the positive effects is the sports betting industry, which continues to see growth as punters turn to betting shops and online affiliate sites such as Betenemy. A website dedicated to providing information for sports betting enthusiast, it features extensive online sportsbook reviews and other informative articles focused towards the sports betting market.

While the help-to-buy program is expected to end in 2023, it will remain available to those who are first-time buyers. Taylor Wimpey’s Redfern stated that the company has lobbied in hopes of seeing it extended but feels in some ways, it has remained in place longer than it should. Redfern believes it is a government tool that is put in place during a low production cycle but is not meant to increase the high production year cycles. He added that it should have been put in place a few years earlier and should have ended sooner.

As a result of its increased profits, Taylor Wimpey divided almost £500 million in dividends to shareholders, an increase of £50 million from 2017. That is a substantial difference from 2009 when the company has to deal with debt refinancing. At that time, the company was still dealing with a scandal pertaining to ground rent that saw thousands of homeowners contracts that saw rent spiralling out of control. As a result, the company had to put aside £130 million last year to those with freeholds over to leaseholders on a ten year doubling lease and changing it to an RPI-based structure. That will see approximately 50% of homeowners being switched to terms less burdensome ground rent terms in 2019.

By Boris Dzhingarov

© 2019 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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