The firm blamed the rise on stockpiling across the construction supply chain and the impact of lower exchange rates from Brexit uncertainty.
In a half year trading update this morning, the firm said the market for new build housing had remained stable in the first four months of year, with spring selling season sales at encouraging levels, although at flat prices.
Average private sales so far have run ahead of expectations at 1.03 per outlet per week (2018 week 16: 0.85) as the house builder focused on optimising larger sites.
Chief executive Pete Redfern said: “Given the strong sales performance, we expect full year volumes to be slightly higher than 2018.”
“But given the greater build cost inflation for the year, we expect margins to be slightly lower.”
“We have seen higher than expected cost inflation in early 2019, particularly in materials, and now expect build cost inflation for 2019 to be around 5%,” warned Redfern.
“This is driven by a combination of underlying cumulative inflation and exchange rates impact on the cost base of suppliers, and a higher than expected demand in the short term from defensive additional buffer stock holding in the construction industry supply chain.”
Despite pressure on margins he said: “We are well positioned with a clear strategy in place that provides the flexibility to further increase our pace of build in future years, provided market conditions remain supportive.
He added that subject to land spend variations, Taylor Wimpey expected to end the year with a net cash of £500m after dividend payments of £600m.