Housebuilder Taylor Wimpey expects profits for 2021 to come in well above expectations after the housing market bounced back stronger than it had forecast.
The FTSE 100 builder also said it has ramped up the acquisition of land, buying 70 sites with around 14,500 plots, in a sign that it expects demand for new-built homes to continue.
Taylor Wimpey, which has been allowed to have its construction sites and showrooms open through the new national lockdown, said demand had held up well since its last update in July and its order book remained ‘strong’.
Taylor Wimpey is buying more land than it usually does, taking advantage of depressed prices
Chief executive Peter Redfern said: ‘The trading backdrop remains resilient and the quick recovery of the housing market is testament to the underlying strength of demand and supportive lending backdrop.’
Shares in the company jumped 12 per cent to 138.66p by 11am on Monday, making it the top riser on the FTSE 100.
As long as the market remains stable, Taylor Wimpey should see operating profit of £270million this year, which is towards the upper end of expectations, it said.
It sees profit for 2021 to be ‘materially’ above guidance of £359million-£626million as it expects next year’s completions to be 85 to 90 per cent of 2019 pre-Covid levels.
‘What is striking about the latest update is its confidence not just in this year – when the pent-up demand from lockdown and a stamp duty holiday have been obvious tailwinds – but also next year,’ said AJ Bell’s investment director, Russ Mould.
Taylor Wimpey has become the latest housebuilder to benefit from the property market mini-boom, with Redrow also reporting strong demand for homes and Barratt a 24 per cent rise in sales since July last week.
It has also benefited greatly from the taxpayer-backed Help to Buy scheme, which however is changing from March next year, when it will be restricted to first-time buyers.
Having raised cash in June, the company is buying more land than it usually does, taking advantage of depressed prices.
It said it is spending some £826million on land purchases this year, expecting to invest ‘significantly’ in additional land over the next 12 months.
‘Quick recovery’: Chief executive Peter Redfern is upbeat about the coming months
Anthony Codling, chief executive of property platform Twindig, says this suggests the company believes the current property market mini-boom will continue.
‘Taylor Wimpey has been very active in the land market, buying land significantly ahead of its normal rate of land acquisition,’ he said.
‘This suggests that the Group believes that the recovery in the UK housing market has both length and depth and that a collapse in house prices is unlikely – why buy land today if you believe you might be able to buy it at a lower price tomorrow?’
The company also said it plans to pay out a dividend next year and will review a special dividend for 2022.