Housebuilder Taylor Wimpey, meanwhile, announced a £92 million pre-tax loss for the first half of the year. The company says it lost this much due primarily to exceptional charges related to cladding remediation. So far, the firm has committed £435 million to remedy dangerous cladding and pervasive fire safety defects in its buildings. Unfortunately, these problems have taken a toll on its bottom line.
Taylor Wimpey recently revealed it was putting aside an additional £222 million. This funding will go toward remediating fire safety defects in the homes it constructed. Defects became apparent which had been concealed prior to us beginning the remediation of buildings with ACM cladding. These unseen problems resulted in unforeseen expenses. In addition, the company mentioned rising construction costs and new fire engineer evaluations as adding to the overall fiscal pressure.
These charges have a devastating impact. Consequently, Taylor Wimpey’s UK sales rate for the second half of July is down on the same time last year. The average sales price for its homes in the UK has fallen to £313,000 – down from £317,000. This steady decline is a worrying sign for the overall housing market, especially for first-time buyers who still struggle with affordability issues.
Cladding aside, Taylor Wimpey is clearly committed to addressing safety defects at the company’s expense. They have further committed £100 million to fund affordable housebuilding as part of their settlement with the Competition and Markets Authority (CMA). The company allocated £15.8 million of this total to affordable homes. When you factor in legal costs, their total outlay associated with the deal gets up to approximately £18m.
Despite these financial challenges, Taylor Wimpey’s chief executive, Jennie Daly, emphasized the company’s commitment to tackling these issues. She highlighted the new affordability crisis that first-time buyers find themselves in. Yet this group is disproportionately affected in today’s market climate.
Like other major homebuilders, Taylor Wimpey is up against a worsening macroeconomic backdrop. Indeed, this issue deeply affects all the other top four big housebuilders in the industry. As it stands, the seven biggest listed housebuilders have already accrued a total cladding remediation debt of over £3.5 billion. This monumental sum should sound deep warning bells regarding the stability of our housing market.
As Anthony Codling with RBC Capital Markets observed, like what’s happening with Taylor Wimpey could be a harbinger of bad news for other builders, too. He stated, “concern for some of the other housebuilders as well.” Codling further elaborated on the unforeseen nature of the costs associated with cladding work, stating, “Because if you can’t see that this work needs to be done before you start, no-one would have anticipated it.”
Whether due to these financial disclosures, or due to their recently reported sales numbers showing quarterly declines, Taylor Wimpey’s stock price dropped drastically on Wednesday. It will be a very hard road for the company as it balances its relatively new remediation commitments with an increasingly chilly housing market.
