Taylor Wimpey moved into the black last year, recovering from the worst slump the housebuilding industry had seen in decades. The group, which was formed by a merger at the peak of the boom in 2007, reported its first annual profit on Thursday.
The UK's second-largest housebuilder beat City forecasts with a profit before tax and one-off items of £75m compared with a loss of £96m in 2009.
Despite a good start to 2011, Pete Redfern, the chief executive, believed the market would be broadly flat. "The base case [for prices] is flat with upside and downside risks of 2-3% either side," he said. "Mortgage finance is very slowly getting better, and in two years we might be back to normal."
Taylor Wimpey built 9,962 homes in the UK in 2010, down from 10,186 the year before, but with an average selling price nearly 7% higher at £171,000. The group has put its North American operations up for sale to pay off debt and focus on the UK, and hopes to wrap up a deal by the end of the year.
Like other housebuilders, Taylor Wimpey is building fewer flats – now 24% of the total, down from 42% at the peak – and more houses. There was also a trend to build more in the south rather than the north, where the housing shortage is less acute, said Redfern.
He said the company would continue to work with the mortgage industry to find new ways of increasing lending, such as its recently launched Take 5 product, which uses an insurance-backed guarantee to provide a 95% mortgage.
Given the dearth of property finance, it has been suggested that pension funds could help fill the gap by investing in social housing as well as private rented houses. Rental income promises stable long-term returns of about 5-6%. "The key is for this to happen on [a bigger] scale. I think it will happen but it will be a very slow, gradual thing and won't replace traditional mortgage lending," said Redfern.
Meanwhile, a strong rise in demand, coupled with falling supply, pushed up rents in the three months to January.
The Royal Institution of Chartered Surveyors said the squeeze on mortgage lending had pushed up demand for rented properties at a time when supply was tight. Only the south-west saw more estate agents reporting falls than rises in rental values. The biggest rise in demand was for family homes, mainly from households unable to access the mortgage market.
Landlords also faced increasing demand for social housing, with the proportion of social tenants almost doubling since 2008 from 6% of the market to 11%.