Strong foundations for resurgent housebuilders

Taylor Wimpey (TW-) and Redrow (RDW) today put the wind back into housebuilders' sails as they reported a welcome improvement in housing market conditions.
 
The FTSE 250-listed groups have seen firmer prices, stronger reservations and lower cancellation rates as the sector starts to emerge from one of the most severe downturns in decades.
 
Taylor Wimpey, which tapped shareholders for £510 million earlier this year, has seen stabilising order levels and a 9% rise in selling prices of £163,000 from the first half of the year.
 
The UK's second largest housebuilder by market value put this down to "planned improvements in our mix towards housing rather than apartments, as well as price increases achieved over the last three months."
 
Meanwhile Redrow reported a 47% rise in total net private reservations for the first 18 weeks of the financial year compared to the same period last year, averaging 45 homes a week.
 
It now intends to focus on family housing in a bid to boost selling prices further.
 
Taylor, which last year was battling for its survival, added that the current value of its order book stands at £1 billion, down fractionally from £1.06 billion last year. With 2009 now fully sold, Taylor says its focus is on achieving price increases in its 2010 order book.
 
Its net debt levels have also fallen from £1.87 billion last year to £860 million. It hopes to reduce this further to below £800 million by the end of the year.
 
"Our own performance has remained encouraging since the half year. We did not experience the usual industry seasonal slowdown over the summer and sales rates have remained solid into the autumn," it said.
 
However, it also cautioned that: "Sustaining the current recovery will be dependent on improvements in mortgage availability and the wider economy."

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Over in the US it says that both volumes and prices have been stable against the first half. "Foreclosures are not having an incremental negative effect and inventories in the market are falling. The company rightly points out that US affordability is now very good," says Imran Akram of Collins Stewart.
 
Redrow, which today said 97.2% of shares had been snapped up its recent 13 for 14 rights issue to raise £150 million, also remained cautiously optimistic.
 
Following the cash call and the acquisition of Harrow Estates, net debt will stand at around £65 million.

It said: "The underlying housing market remains influenced by the availability of mortgage finance and consumer confidence generally, but we enter 2010 well placed to meet the challenges and opportunities ahead."

"We anticipate that the land market will gradually return to more normal levels of activity over the next 12-18 months with increasing numbers of opportunities emerging," Redrow added.

For more on the latest from Taylor Wimpey check out Edmond Jackson's podcast on the housebuilder.