First Signs of New Build Slowdown?

TAYLOR WIMPEY announced a new build cancellation rate for the second half of the year of 24% in its latest trading update.

The cancellation rate compares to last year’s figure of 14% and suggests that, while facing rising mortgage rates and economic instability, prospective homeowners are changing house buying plans. It follows news released earlier this week of a rise in Persimmons’ cancellation figures from 21% to 28% during the past 6 weeks.

Taylor Wimpey said that to date their total order book excluding joint ventures stood at £2.6bn, down from £2.8bn last year, representing 9,153 homes of which 79% is exchanged.

The company also says that where customers have locked in mortgage rates, they remain keen to complete their purchase, but that conversions are taking longer from website visits.

Taylor Wimpey says the figures reflect “customer response to heightened levels of economic uncertainty”, reporting a fall in net private sales rate of 0.51 homes per outlet per week in the second half of the year to date, compared to 2021’s figure of 0.91. All this while build cost inflation remains at around 9-10%.

New Build Slowdown

Reflecting the “uniquely disruptive political conditions and deteriorating economic outlook since September”, Persimmon likewise reports in the last 6 weeks the average net private weekly sales rate per outlet has fallen to 0.48, from the 0.60 figure of the past 4 months. Average selling price for private reservations in the past 6 weeks reduced by 2% compared with the 12 weeks from 1 July.

To manage risks, Taylor Wimpey has been “closely monitoring the market and lead indicators”. It says it has increased cost control, increased management controls and readied sales teams for selling in a tougher market.

Taylor Wimpey acknowledges “uncertainty in the market”, adding that “higher mortgage rates will contribute to the wider cost of living challenges affecting our customers”. Nevertheless, the company says it remains “confident in the long-term sector fundamentals with a continued meaningful supply and demand imbalance in UK housing.”

Jennie Daly, Taylor Wimpey CEO, said: “In a challenging economic and political backdrop we are performing well and are on track to deliver full year operating profit in line with market expectations.

“While sales rates have been impacted by wider economic uncertainty, Taylor Wimpey is an agile business and we have been focused on operational efficiency and execution.”

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