The housing market is recovering faster than initially thought as house buyers benefit from the stamp duty holiday and other Government incentives, according to Taylor Wimpey.
Due to the boost, bosses at the housebuilder believe profits next year will be significantly higher than previously thought.
Investors also cheered as the company said it expects to pay out a dividend next year and will review a special dividend for 2022. Shares jumped 11% in early trading.
Chief executive Pete Redfern said: “The trading backdrop remains resilient and the quick recovery of the housing market is testament to the underlying strength of demand and supportive lending backdrop.
He added: “Looking ahead, we are on track to deliver full year 2020 results towards the upper end of market expectations and with strong operational momentum and positive forward indicators, our confidence in 2021 has increased.
“As a result, assuming the market remains broadly stable, we expect to deliver 2021 operating profit materially above the top end of the current consensus range.”
Customers have benefited from the extension to the Government’s Help to Buy scheme and from the Stamp Duty holiday, which runs until March next year, the company explained.
Bosses were also hopeful that the new lockdown measures in England will not affect the construction sector, which was forced to stop during the lockdown in March.
Taylor Wimpey explained it has still been able to hold customer appointments and viewings, with builders allowed on sites during the new lockdown.
It said: “The early signs suggest that customers wish to continue to progress purchases, with forward sales indicators at healthy levels, whilst our outlet and product profile is well positioned to meet increased customer demand for well-designed homes in quality locations with good community amenities.”
The company added that private average selling prices remain ahead of 2019 and it hopes to cash in on future demand, spending £826 million on land purchases, across 70 sites with 14,500 plots.
Bosses said this was above usual levels, with the cash secured from an investor fundraiser, and they expect an average return on capital employed of 34%.
Cost reductions have also helped boost the company’s accounts, with changes expected to save around £15 million in costs from next year.
These changes include redundancies at head office and a “rationalisation of our London operating structure to focus on affordable price points that meet the affordability needs of Londoners, and a series of reductions in central and business unit overhead levels.”
Separately, Taylor Wimpey said its Spanish business, where the second-home housing market has been collapsed, is expected to return to normal by 2022.