Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

'Ghost' buyers fuelled US crash

Taylor Wimpey has said the trend of people buying homes they never intended to live in helped cause the housing crash in the US.

The firm’s US operations made a pre-tax loss of £254 million as the bottom dropped out of the market last year.

Operating margins at the business collapsed by 70 per cent to 5.1 per cent while completions tumbled by a quarter to 6,740 for the year ending December 2007.

Its US woes helped the group nosedive into the red, recording a pre-tax loss of £19.5 million from a £405.6 million profit last time.

The firm’s chief executive of its UK housing division said the US was now reeling from the affects of buyers not being able to pay back mortgages they never really intended to hang onto. Ian Sutcliffe said: “Market conditions in the US remain extremely difficult and I can’t see it improving.”

He added: “Numbers were artificially propped up by people buying off plan. They were speculating on the future value and by the time the house got built they were expecting double-digit growth on their investment.

“Unfortunately a lot of people got sucked in which was all well and good when they thought it was a one-way track. But they were borrowing money when they really shouldn’t have and they never really thought they would have to pay the loan back in full because they thought they could easily sell it.”

He said that developers were caught up in the fever expanding landbanks by three or four years in anticipation of a booming market.

He added: “Development is still going on but at a much reduced rate and what’s happening now is firms are trying to bring supply back in kilter with demand.”

Its UK results were much healthier with Taylor Wimpey turning in a £367 pre-tax profit but Mr Sutcliffe warned that orders were down 19 per cent on this time last year. He said: “Things are better now than in the fourth quarter but I think volumes this year will be down.”