Taylor Wimpey sales fall as Iran war pushes up building costs
Leading housebuilder Taylor Wimpey is bracing for rising costs in its supply chain as the industry warns of soaring building inflation caused by the Iran war.
The housebuilder’s warning prompted its stock to dip in early trading, pushing its share price down as much as 4.7 per cent on Tuesday.
The FTSE 250 firm’s order book stands at 7,689 homes, six per cent lower than in April last year, as the value of these deals fell five per cent to £2.2m.
Taylor Wimpey said it is “closely monitoring the macroeconomic backdrop” and forecasts building cost inflation to reach low-to-mid single digits this year.
“Cost pressure and surcharges [are] starting to come through from our supply chain,” the firm said.
Housebuilder ‘tightly controls’ land spend
Taylor Wimpey said it will “tightly control” its spending on land, which it said is already “highly selective”.
The housebuilder said last month it is aiming for a £400m pre-tax profit this year – down from last year’s £421m – but analysts suggested a bigger profit drop is possible following Tuesday’s warning.
Earlier this month, Barratt Redrow – the UK’s largest housebuilder – said it will dramatically cut back its spending on land, citing a need for caution amid the economic knock-on of the Iran war.
Housebuilder Berkeley saw its share price plummet at the start of April after it said it would pause land buying completely, amid an “unprecedented increase in cost and regulation”.
These announcements will pile further pressure on the government’s plans to build 1.5m homes by the next general election, which construction firms have said is under threat.
The Office for Budget Responsibility (OBR) has said net additions to the UK’s housing stock will fall to a low point of 220,000 this year, with Labour’s planning reforms yet to “meaningfully materialise” in accelerated housebuilding.
Housebuilding target under threat
Earlier this month, CityAM revealed that the construction of build-to-rent homes – a crucial part of Labour’s housebuilding mix – has fallen for the ninth consecutive quarter.
Hargreaves Lansdown analyst Aarin Chekrie said: “In line with the whole sector, Taylor Wimpey’s valuation has taken a big hit in recent months due to the Middle East conflict
“Taylor Wimpey’s doing what it can to manage its cash flows prudently, including cutting back on buying new land and managing its works in progress carefully in line with demand.”
The housebuilder said it is seeing strong progress on planning and home delivery despite the uncertainty caused by the Middle East conflict.
Taylor Wimpey chief executive Jennie Daly said: “Sales in the year to date have been steady and our teams continue to work extremely hard to support customers through their homebuying journeys against ongoing affordability challenges and an increasingly uncertain macro backdrop.”
Tuesday’s share price dip left Taylor Wimpey’s stock down 32 per cent in the past year, to 79p.