UPDATE 2-Taylor Wimpey sees stable outlook for UK house market

Wed Jul 4, 2012 9:28am BST

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LONDON, July 4 (Reuters) - Taylor Wimpey expects an improvement in its financial results in the first half, supported by a "stable" UK housing market that the UK housebuilder believes is likely to stay that way.

The company and its rivals are benefiting from a shortage of supply of new homes in Britain even though the economic climate is bleak with the economy back in recession.

If these stable market conditions continue, the group expects to continue posting a better performance period-on-period, with full-year returns in 2012 that are ahead of cost of capital and in line with expectations, Taylor Wimpey, Britain's second biggest housebuilder by volume, said on Wednesday.

"We think it is most likely that the current conditions will continue, but that doesn't mean it's certain," Chief Executive Pete Redfern told reporters.

The major risks were from outside the UK housing market, and mainly to do with the banking system, he said, adding that those risks had existed for some years without having a significant impact on the market.

"We like everybody else will watch what's happening in southern Europe, with the impact on the banking system, closely," he said.

Redfern added that if conditions remained broadly stable, he was "happy" with a consensus of analyst forecasts that put full-year operating profit at around 207 million pounds ($324.54 million), about 30 percent higher year-on-year.

The group completed 5,083 homes in the first half, up from 4,707 in the first half of 2011, with the overall average selling price of the completions increasing to 175,000 pounds ($274,400) from 168,000 pounds.

Tightness in supply offsets the difficulty buyers face in securing mortgages, Redfern said. "The tightness of supply is reassuring."

The company was continuing to buy land when it could do so at attractive return levels.

Taylor Wimpey's order book grew to 960 million pounds as of July 1, up from 932 million pounds a year earlier.

The company's shares were down 2.13 percent at 48.21 by 0822 GMT.

In Spain, where the group has a small operation dating back decades, market conditions remained challenging. It completed just 13 houses in the first half, at an average selling price of 172,000 pounds, down from 30 in the first half of 2011 at an average price of 266,000 pounds.

Redfern said the group would probably make a small profit in Spain this year, but was not adding to its asset base there.

He said in the short term the aim was to generate some cash and recover some of the value of the land.

"It's obviously not a market we would enter today."

Fellow housebuilder Gleeson also said on Wednesday its order book had increased 18 percent to 10.8 million pounds.

Persimmon, Britain's biggest housebuilder by market value, on Tuesday said it had made an excellent start to its new strategic plan, completing 4,712 new homes in the first six months of 2012, a six percent increase year-on-year.

It said market conditions had been relatively stable although sentiment in the UK housing market continued to be affected by weakness in the country's economy.

Taylor Wimpey reports full-year results on Aug. 1.

($1 = 0.6378 British pounds) ($1 = 0.6378 British pounds) (Reporting by Helen Massy-Beresford. Editing by Jane Merriman)

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