Taylor Wimpey share price popped today, reaching its highest level since March 5 this year as the government launched a new scheme to help people buy homes. TW soared to 98.82p, up by over 33% from its lowest level this year. Other housebuilders like Persimmon and Vistry also jumped.
Taylor Wimpey shares jump on new government scheme
Taylor Wimpey, one of the biggest housebuilders in the UK, announced a new scheme to help new homebuyers acquire homes in the UK. The scheme is known as “Your first home” and will focus on buyers in England who have a regular income but are unable to save for a large deposit.
These buyers will get a 20% equity loan to help them buy a home, with an initial interest free period and a minimum deposit of just 2.5%. This program will have a household income and deposit cap to exclude high-income earners. Analysts believe that the scheme will help companies like Taylor Wimpey, which build and sell homes in the UK. In a statement, an RBC analyst said:
“We believe that those with most exposure to the south and south east (Crest Nicholson) and the more liquid stocks, such as Taylor Wimpey, will outperform, and those with the least exposure to open market homes (Vistry) and homes likely to be priced above the Your First Home price cap (Berkeley) to underperform on a relative basis.”
READ MORE: What next for Taylor Wimpey share price after distributions cut?
Taylor Wimpey’s business has faced some major headwinds
Taylor Wimpey and other UK housebuilders have faced some major headwinds this year. UK mortgage rates have soared, with the average rate rising to nearly 6%, which has made housing unaffordable for most people.
At the same time, the cost of doing business has continued to rise this year because of the ongoing US-Iran war. For example, these firms are now having to pay more money for their transportation because of the surging diesel prices. The company noted that:
“While underlying customer demand continues to be good, conversion is taking longer and buyers remain highly price conscious.”
The results showed that its completions dropped to 4,986 in the first half of the year, down from the 5,294 in the same period last year. As a result, its net private sale rate dropped to 0.75 per outlet from 0.79 last year.
Even so, Taylor Wimpey’s revenue rose to 1.68 billion pounds, up by 1.7% from a year earlier. Its profit before tax (PBT) jumped to 116.8 million pounds. The management also warned that market conditions will be challenging for the remainder of the year, with its expected completions being between 10,600 and 10,800.
Taylor Wimpey share price technical analysis
TW stock chart | Source: TradingView
The daily chart shows that Taylor Wimpey’s stock surged to $98.82 and then reversed the gains to 89.74p. Before this rebound, it remained inside a narrow range between the support and resistance levels of 73.94p and 87.58p.
Its highest level today coincided with the 61.8% Fibonacci Retracement level. It remains above the 50-day and 100-day Exponential Moving Averages (EMA). Therefore, the most likely scenario is where it drops further, potentially to 87.58p and then consolidates as investors wait for the next actions by the government and the impact on its business.
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