British housebuilder Taylor Wimpey said it had seen enduring stability in the housing market in the past six weeks, and it might increase the number of new sites in the second half, lifting shares in the sector.
"We have been encouraged by the ongoing stability in the UK housing market, but remain cautious with regard to the prospects of the wider economy and, in particular, the potential impact of rising unemployment," Taylor Wimpey said today.
Its shares, which had fallen over 20 per cent in the past fortnight and have underperformed the stock market by 11 per cent over the past year, were up 7.3 per cent at 33.25 pence at 7.40am. Other housebuilders' shares also rose.
KBC Peel Hunt analyst Robin Hardy said Taylor Wimpey stock could bounce after a sharp recent correction, but it "cannot shake off the wider issues of unemployment and a poor lending environment. The pricing environment is not going to improve any time soon, and this is the worst scenario for new build".
The number of Britons claiming jobless benefit rose less than expected in May but still enough to push the unemployment rate to its highest in more than a decade.
Recession and rising unemployment have led to house prices falling about a fifth from their peaks in the autumn of 2007.
But prices in May rose 2.6 per cent, the biggest monthly gain in 6-1/2 years, according to the Halifax, Britain's biggest home loan lender, while the Nationwide Building Society reported a 1.2 per cent rise for the month.
Taylor Wimpey said its current order book was £971 million ($1.59 billion), up 73 per cent from its end-2008 level.
"Our net private reservation rate remains at around 0.6 per site per week, with prices broadly flat and cancellation rates below the long-run average," Taylor Wimpey said, adding: "The severe downside scenarios for which we have been planning now appear less likely to materialise".
Taylor Wimpey said the land market remained subdued, but "we have made some ordinary course of business land sales during the first half of the year at values close to written down levels", adding it would review land values at the half-year stage.
Acquiring land at the peak of Britain's decade-long housing market boom led the company to rack up its debt.
On May 8th, the company raised £533 million in a share sale to reduce its £1.57 billion debt pile. Taylor Wimpey had already agreed a new £2.5 billion financing deal on April 7th.
The company said in May the fundraising would enable it to save over £400 million in interest over the next three years, and allow it to acquire land and reopen mothballed sites.
Turning to other markets, Taylor Wimpey said trading in North America had improved in recent months, with higher reservation rates and fewer cancellations.
Reuters