As a long-term holder of Taylor Wimpey (LSE:TW.) shares, I have to concede that the housebuilder hasn’t delivered the returns I’d been hoping for.
Tough conditions in the housing market have weighed heavily on the FTSE 100 company and its peers. It means that, over the last decade, Taylor Wimpey’s seen its share price decline 23.6% over the period, from 142.5p to current levels of 108.8p.
£10,000 worth of shares in mid-April 2015 would now be worth £7,599.
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However, holding Taylor Wimpey shares hasn’t been anything near a disaster over that time. Thanks to dividend income of 100.05p per share in that time, an investor would have achieved a healthy positive return of 46.2%, meaning a £10k investment would have made them a profit of £4,261.
Taylor Wimpey’s average annual return over the last 10 years is 3.9%, below the FTSE average of 6.3%. But I’m hopeful this could improve significantly over the next decade.
Improving outlook
One reason is that difficult lending conditions in recent times look set to continue steadily improving. Last year, Taylor Wimpey recorded 10,593 completions (including joint ventures), down from 10,848 in 2023 and 14,154 the year before that, as Bank of England (BoE) interest rate hikes hit buyer affordability.
But falling inflation has prompted policymakers to start cutting rates, a cycle analysts have tipped to continue over the short-to-medium term.
Homebuyer affordability will also be helped by an intensifying mortgage product among Britain’s lenders. Rates are falling sharply, and deposit requirements are also easing. This week, the number of 5% deposit loans on the market rose to the highest level since 2008, according to Moneyfacts.
The company’s profits could also surge as the government takes action to supercharge housebuilding in the UK. A potential bonfire of planning regulations might lead to 1.5m new homes being built in the five years to 2029.
Taylor Wimpey expects completion numbers to stabilise and range between 10,400 and 10,800 (excluding joint ventures) in 2025. I think they could pick up substantially thereafter.
33.9% price gains?
Unfortunately, price forecasts for Taylor Wimpey shares aren’t available for the next decade. But the builder’s tipped to enjoy rapid gains over the next 12 months, at least.
Sixteen analysts currently have ratings on the company. Each expects Taylor Wimpey shares to rise in value over the next year, with the average price target sitting at 145.6p.
That represents a 33.8% premium to current levels.
In good shape
Yet despite these bullish estimates, it’s important to stress that Taylor Wimpey and its peers aren’t out of the woods just yet.
Any fresh spike in inflation could cause the BoE to pause its rate cutting strategy. Policymakers may even raise the lending benchmark if, for instance, US trade tariffs supercharge the pace of price rises. On top of this, housebuilders are battling to contain labour-related costs due to skill shortages in the UK.
But on balance, I think things are looking up for the FTSE builder. This is reflected by City forecasts suggesting that earnings growth will improve rapidly. They’re tipping a 2% profit increase for 2025 to accelerate to 19% next year, and to rise a further 18% in 2027.
Despite recent underperformance, I plan to keep holding my Taylor Wimpey shares for the long haul.
