January 15, 2014 5:29 pm

Taylor Wimpey warns over pressure on land bank

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Taylor Wimpey has warned that the rapid recovery in new home sales means it is finishing building on sites faster than it can replace them.

Like all the large, listed housebuilders, Taylor Wimpey – the second-biggest by turnover – has been reaping the benefits of the government-backed Help to Buy scheme, which offers top-up loans to first-time buyers.

The Buckinghamshire-based builder said in a full-year trading update that total completions in the year to the end of December increased by 7 per cent to 11,696 homes. Help to Buy accounted for about 20 per cent of those sales.

The FTSE 250 company also took advantage of stable land prices to boost its stocks of “strategic” land – sites bought without planning approval attached – which is now at a record level of 110,000 plots, having added more than 10,000 in 2013.

But the number of outlets – sites Taylor Wimpey is actively building on – was down from 327 at the end of 2012, to 314 last year. It expects this number to grow only “modestly” in the coming year.

Pete Redfern, chief executive, said of the growing pressure on land: “It’s small, but it’s there. The harder you drive completions, the more acute it becomes.

“If we doubled the pace at which we sold those sites, we’d end the year with half the number of outlets, because other sites aren’t coming through the [planning] system.”

Mr Redfern also warned of initial signs of growing competition for land outside the southeast, adding that all the large, listed developers were “active in all regions – that makes a difference”.

Taylor Wimpey promised to update shareholders on a possible cash return at its full-year results in February.

Jon Bell, analyst at Barclays, said Taylor Wimpey was “dropping a very subtle hint” with its cautious note on the land market. “I think they’re just warming the market up to the debate about whether to buy land or return cash to shareholders,” he said.

In the years leading up to the financial crisis, some investors felt housebuilders prioritised their land banks and volume growth over shareholders.

Taylor Wimpey has set out to grow more conservatively this time around. Its forward sales in 2013 were up 27 per cent, compared with rises of 41 per cent and 71 per cent for rivals Persimmon and Barratt, respectively.

Taylor Wimpey on Wednesday said it was in a net cash position for the first time in “at least 20 years”, according to Mr Redfern.

Taylor Wimpey shares, which have risen more than 50 per cent in the past year, fell 1.5 per cent in Wednesday afternoon trading to 117p.

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