Housebuilder Berkeley flags cautious approach to London


London housebuilder Berkeley Group is taking a extra cautious method to purchasing land, in an indication {that a} cooling housing market and excessive inflation could gradual growth exercise within the capital.

The FTSE 100 group stated on Tuesday that with expectations of a property downturn rising and value inflation working at between 5 and 10 per cent, “new land will solely be added to the land holdings very selectively”.

Rising prices will weigh on growth throughout the business. However they’re a very troublesome for personal residential builders in London, which have been already struggling to compete within the land market, based on Rob Perrins, Berkeley’s chief government.

He stated tariffs on housebuilders to ship new reasonably priced housing, enhance infrastructure and guarantee growth was environmentally pleasant made competing with workplace or warehouse builders more and more troublesome.

“Due to taxes on residential, different makes use of have greater worth: motels and industrial in zones 1 and a couple of and industrial in zones 3-6 . . . that’s why personal housing begins have halved since 2015, and I feel will halve once more,” he added.

Work began on 16,673 new houses within the capital final 12 months, fewer than half the 33,792 began in 2015, based on information supplier Molior London. Mayor Sadiq Khan has centered his efforts on boosting reasonably priced housing begins, that are up over the identical interval.

Regardless of the additional prices, Berkeley stated it anticipated to e book a pre-tax revenue for the 12 months to the tip of April 2023 of £600mn, up from £552mn within the earlier monetary 12 months and consistent with expectations.

Berkeley’s share value rose 4 per cent to £35.92p on Tuesday, recovering from a dip final week after analysts at HSBC predicted home costs in London may fall as a lot as 15 per cent and downgraded the corporate.

Berkeley added that there was nonetheless robust demand from consumers and that it was promoting houses for greater than it had anticipated.

The corporate advantages from a powerful stability sheet and the continual undersupply of homes within the UK, based on Ami Galla, an analyst at Citi.

However “weak shopper confidence, tight affordability and political uncertainty have seen a gradual drop in home costs in London,” she stated in a notice.

Berkeley already has a big land financial institution in London because of a deal struck with National Grid in 2014. The utilities firm bought its stake in that three way partnership earlier this 12 months, and Berkeley can construct till 2028 with out requiring new websites, stated Perrins.

The corporate is contemplating bidding on two websites exterior of London, however shouldn’t be something inside the M25, he added.

Berkeley additionally narrowly signed off on a remuneration plan that might see Perrins take residence £8mn a 12 months, and different administrators as a lot as £3.25mn in whole topic to the corporate’s long run share value efficiency. The plan was authorised at Tuesday’s AGM, however 40 per cent of shareholders voted in opposition to it.

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