For years now, I’ve been hearing about the great property slump that’s supposed to be just around the corner. Then there’s the Taylor Wimpey (LSE: TW) dividend. Or, rather, there isn’t. It was suspended in the early days of the Covid-19 pandemic. Put these together, and what’s the result? After starting the year well, the Taylor Wimpey share price is now down 26% since the beginning of 2020.
That’s a big improvement on the situation in April, mind. At the bottom of the stock market crash, Taylor Wimpey shares had lost 48%.
No property slump here
Is a property slump really going to happen? I’m convinced it isn’t. Well, no residential property crash. Commercial property is a different matter, and retail assets are suffering badly, Intu Properties, for example, has been struggling to collect its rents and pay its debts, and could be on the brink of collapse.
So there’s been massive pressure on the Intu Properties share price, but far less on the Taylor Wimpey share price. Struggling retailers can just stop retailing and walk away, leaving commercial property owners in the soup. But people living in houses can’t do that. In the UK we’re in the grip of a chronic housing shortage too, and I don’t see a let up any time soon. Or any reasonable time beyond soon, for that matter.
Long-term demand
Whenever there’s an excess of demand over supply, prices tend to rise. And it might come as a surprise that it appears to be exactly what’s happening even during the Covid-19 crisis. According to Zoopla, house prices are going to keep on rising over the next three months. And that’s got to be good for the Taylor Wimpey share price.
While the supply of new houses has been hampered by the lockdown, demand is building up again as the rules are being relaxed. The property experts reckon demand has risen 46% in the past few months, and predict a 2% rise in prices between now and September.
Taylor Wimpey has completed a successful share placing, and it should be in good financial shape for the progressive easing of the lockdown. When the company gets back to full production, it looks like the buyers will be queueing at the door.
TW share price future
I can see the Taylor Wimpey share price continuing to rise over the next few months. But I don’t expect full confidence to return until we see the shape of its long-term dividend policy. The company has been a big payer in recent years, and it’s arguable that it should have been a bit more conservative with the dividends. Had dividends been kept slightly more modest, the 2020 crunch might not have been so tough. And the new stock placing, which dilutes existing shareholders, might not have been needed.
I’m hoping to see a renewed progressive dividend policy, but ideally with a little more cash kept back for better balance sheet strength. If that happens, I think the Taylor Wimpey share price could seriously pick up.