Taylor Wimpey cautions over rising construction costs amid ‘uncertain’ market

Housebuilder Taylor Wimpey has cautioned over pressure on construction costs this year as suppliers mitigate the impact of Budget tax changes and uncertain economic conditions.

The developer nonetheless said it was beginning 2025 on stronger footing thanks to an uptick in sales over the second half of last year.

It completed the sale of 9,972 homes in the UK over 2024, lower than the 10,356 completed in 2023 but at the upper end of its previous guidance range.

This means its full-year operating profit is expected to meet a previous forecast of £416 million.

The average selling price of a home, sold privately in the UK, was £356,000 last year, lower than the £370,000 average price in 2023, it revealed.

Taylor Wimpey said house prices were weaker in the South of England where “affordability has been most stretched”, compared to the North where there had been some price growth.

Looking ahead, the FTSE 100-listed company said it was starting 2025 with a bigger order book than last year and an encouraging level of enquiries, but that it was too early to gauge customer behaviour.

Its performance will depend on the movement of mortgage rates and their impact on people’s ability to afford a home – with further interest rate cuts expected this year.

It also said it was anticipating increased pressure on construction costs due to the changing economic landscape, and as suppliers work to mitigate the impact of the Government’s autumn Budget.

It follows a string of businesses and retailers warning that they may have to raise prices to help absorb the cost of higher taxes this year.

Jennie Daly, Taylor Wimpey’s chief executive, said “market conditions are uncertain, and we continue to monitor the impact of mortgage costs on affordability”, but that the developer was “well placed to play our part in addressing the significant undersupply of UK housing”.

The company said the Government’s plans to reform the planning system in order to accelerate house-building targets were a positive step for the industry.

Aarin Chiekrie, an equity analyst for Hargreaves Lansdown, said: “Taylor Wimpey remains on solid ground, despite a steep share price decline in the final months of 2024 as the UK Budget, sticky mortgage rates and economic fears weighed on the whole sector.

“The order book’s also risen, now sitting at £2 billion, giving Taylor Wimpey good revenue visibility in the near term which should help it ride out the current macroeconomic uncertainty.”