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Taylor Wimpey profits suffer 24% hit in leasehold scandal

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  • 02/08/2017
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Taylor Wimpey profits suffer 24% hit in leasehold scandal
UK house builder Taylor Wimpey took a 24% hit to first-half profits after setting aside £130m to deal with the damage inflicted on consumers by its leasehold practices.

The builder confirmed in April it would set aside £130m for leaseholders who bought its homes with high or escalating ground rent charges, which in turn affected their ability to sell on their properties.

The group said: “We continue to view the provision, before tax, of £130m as an appropriate estimate. The process of negotiation with the owners of the freeholds to these leasehold properties is ongoing, and is proceeding in line with our expectations.”

Pre-tax profits for the year to July 2 were down 24% to £205m, while earnings dropped 23% to £166m.

 

Home building up

However, the group built 9.3% more homes than last year, bringing the total to 6,580, and pushed up the average selling price, excluding joint ventures, to £253,000. In turn, operating profit, before exceptional items such as the leasehold charge, rose by 24% to £346m.

Its order book increased slightly to 8,741 homes, but these were worth 2% less than a year earlier, at £2.1bn.

Pete Redfern, chief executive, said: “Trading through the first half of 2017 has been very positive, supported by favourable UK housing market fundamentals and good customer confidence.”

“In the central London market in particular, we are pleased to see improved customer confidence following a period of uncertainty. We have seen no material change in trading since the general election.”

The group announced a special dividend of £340m, or 10.4p a share, to be paid out in July 2018, an increase on a payout of £301m — or 9.2p a share — this July.

 

Shoddy practices

Last week, UK developers came under fire from the government as it revealed plans to combat shoddy leasehold practices from builders and remove Help to Buy equity loans support as soon as possible on new builds sold as leasehold for no reason.

In the consultation: Tackling unfair practices in the leasehold market, the government said the percentage of residential new build leasehold sales has risen significantly, with Land Registry figures showing that leasehold made up 43% of all new-build registrations in England and Wales in 2015, against 22% in 1996.

While some of this is from the rise in new-build flats, government said it believes developers are selling on a leasehold basis to create an income stream from the ground rent or generate additional funds from later selling the freehold.

The government said it does not believe developers are passing the discount there should be on a leasehold option to consumers.

For more, see our 10 things you need to know about the leasehold consultation.

 

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