Taylor Wimpey is the latest housebuilder to report bumper profits for last year, boosted by the government’s help-to-buy scheme and low mortgage rates, as it signalled a strong start to 2019 despite Brexit uncertainty.
Britain’s third largest homebuilder posted a pretax profit of £810.7m for 2018 – up 19% on the previous year – after selling 15,275 homes. Shares rose 3% making it one of the top risers on the FTSE 100.
Pete Redfern, chief executive, said the firm had yet to see any sign of a Brexit-related slowdown in demand.
“Despite ongoing macroeconomic and political uncertainty, we have made a very positive start to 2019 and are encouraged to see continued strong demand for our homes.”
He added that while it would be “naive not to be concerned” and aware of the risks in the short term, there was a “large underlying demand” for housing in the UK which would not be affected by Brexit in the long term.
The strong results came a day after rival Persimmon reported a £1.09bn profit for last year, the biggest ever made by a UK housebuilder. For every home sold, Persimmon made a profit of £66,265, compared with £53,073 at Taylor Wimpey.
Housebuilders have profited hugely over the past five years from the taxpayer funded help-to buy-scheme, which allows buyers to put down a deposit of as little as 5% on a new build home, while the government lends the buyer up to 20% of the value of the property (40% in London), interest free for the first five years.
More than a third of the homes sold by Taylor Wimpey last year were through the scheme, at 36%, although this was less than the 43% in 2017. The average price of a private home sold by the company was £302,000, up 2%, while the overall average selling price, including social housing, was flat at £264,000.
Taylor Wimpey’s profits have trebled since the beginning of help-to-buy in 2013. It defended use of the scheme, noting that 77% of sales made through it were to first-time-buyers.
Greg Beales, campaign director at Shelter, said: “Taylor Wimpey joins Persimmon as the next developer making massive profits funded by taxpayer cash whilst doing very little to address the housing crisis in this country.”
The help-to-buy scheme is due to end in 2023 and from 2021 will only be open to first-time buyers.
Redfern said the firm had never lobbied for the scheme to be extended and acknowledged that “in some ways it has gone on too long”.
“It’s a tool the government can use at the low point in the production cycle but is not there to boost the upper years of the cycle,” he said. “Ideally it would have been introduced two years earlier than it was and it would have been tapered off earlier.”
Taylor Wimpey handed shareholders nearly £500m in dividends, up from £450m in 2017. It is a big turnaround for a business that had to tap shareholders for £533m in cash following a £2.5bn rescue debt refinancing in 2009.
The company was at the centre of the recent ground rent scandal, with thousands of homebuyers trapped in contracts with spiralling ground rents. The firm set aside £130m in 2017 of which £25.5m has been paid so far to freeholders to move leaseholders with a 10-year doubling lease to an RPI-based structure.
Redfern said about half of homeowners had been switched to less onerous ground rent terms and the pace had picked up.
Last year, Taylor Wimpey took a charge of £46.1m – of which £30m was related to the removal of unsafe cladding on a “small number” of buildings following the Grenfell Tower fire. A further £16.1m covered an increase in pension liabilities following last October’s high court ruling on the equalisation of guaranteed minimum pensions for men and women in UK defined benefit pension plans.