Housebuilder says there are signs that housing market will pick up in second half of 2005.

Taylor Woodrow will post a record profit for the year ended December 31 2004 but at the lower end of market expectations. The housebuilder said in a trading statement that reservations in the second half of 2004 were significantly below last year's levels.

It blamed a cautious approach among buyers caused by continuing uncertainty over house prices. The firm said competitive pressure had led to the greater use of incentives in the market.

Housing completions in the UK were up 18% to 9,053 but were lower than previous expectations. Taylor Woodrow said that customers were taking longer to commit than earlier in 2004, but said that visitor levels to its sites in the last six weeks of the year were ahead of the same period a year ago.

Iain Napier, chief executive said: “In the UK we are well placed to respond to an improvement in consumer confidence.”

Average selling price increased by 9% to £197,000, and the group reported that new home prices had stabilised in the last few months.

The housebuilder identified cost control and prudent land buying as key strategies in the current market. It said it had kept material costs below inflation, but added that high activity in construction meant labour costs were running above inflation.

The company said that low interest rates, the health of the economy and an undersupply of housing meant that prospects for the housing market remained good. It predicts that buyers would remain cautious through the first half of 2005, and said that it would open larger developments later in the year when it believed activity levels would rise.

Taylor Woodrow said that the integration of Wilson Connolly was achieved ahead of schedule and remained on target to achieve synergies of £25m for the full year.

Napier said: “The successful integration of Wilson Connolly and our investment strategy in North America have delivered record levels of home completions and profits.”