The FTSE 100‘s been performing well in 2025. However, some members of the index haven’t fared as well. In fact, one homebuilder has seen a 40% decline in the past year. The share price just hit fresh 52-week lows, causing some to wonder if things could get even worse, or if it’s actually a smart time to buy. Here’s my take.
Facing external pressures
I’m talking about Taylor Wimpey (LSE:TW). It’s one of the UK’s largest residential housebuilders. In terms of its revenue generation, the business model’s relatively straightforward. It acquires land, secures planning permissions, and then builds and sells homes. So why has the stock been hit so hard recently?
Despite the long-term fundamentals of UK housing demand, the stock fall reflects short-term pressures on the sector. The key headwind has been the fact that UK interest rates have stayed higher for longer. This has kept mortgage rates high, meaning that some people simply can’t afford to get on the property ladder. I’ve seen reports that say that many potential buyers who can afford it are waiting on the sidelines for rate cuts. Ultimately, this reduces demand for Taylor Wimpey, hitting both revenue and profit.
At the same time, the company’s faced cost inflation in materials and labour, compressing margins. UK inflation’s rising again, and the company’s exposed to the price pressures.
In fairness, Taylor Wimpey can’t control either mortgage rates or inflation. But these external factors have caused the stock to fall over the past year.
The future could be different
Even though potential buyers might be sitting on their hands right now, the fact is that there’s a structural undersupply of homes in the UK. It’s estimated that over 300,000 new units are needed a year. Clearly, Taylor Wimpey’s operating in a market where demand has to pick back up in the coming couple of years.
In the meantime, the company has a strong balance sheet with significant cash reserves and a well-managed landbank. This should give new investors confidence, as we’re not discussing a company with significant debt or other liabilities.
Further, its scale allows it to negotiate favourable terms with suppliers and spread costs, helping margins recover if inflationary pressures moderate. Although no one can predict the future, I struggle to see inflation returning to pandemic levels, as we’re now in a completely different economic situation.
One short-term risk is higher provisions for cladding fire safety. In the latest half-year report, this was increased by £222m, due to findings from updated fire risk assessments. This needs to be watched carefully.
I’m never going to perfectly buy at the lowest price for Taylor Wimpey. However, with a long-term vision, I struggle to see the stock not recovering in the coming few years. On that basis, I’m seriously thinking about buying it soon.
