Berkeley not planning to increase levels of housebuilding
The group is ‘unable’ to increase production owing to a number of factors including growing economic uncertainty.
Berkeley is not planning to increase levels of housebuilding as it faces up to economic uncertainty, a fall in buy to let investment and increased planning red tape.
The group said that market conditions in London and the South East, its core market, are unchanged from the first half, when it said market fundamentals remain “compelling”.
However, it added that high transaction costs, the 4.5 times income multiple limit on mortgage borrowing and “prevailing economic uncertainty” are some of the factors that mean Berkeley is “unable to increase production beyond the business plan levels”.
Berkeley said: “The fundamentals of the market in London and the South East remain compelling, but the operating environment and its impact on transaction volumes, whilst sufficient for the business plan and five year profit guidance … do not support the step-up in Berkeley’s production levels that these markets so badly need.”
It also pointed to a fall in domestic buy-to-let investors, who have been hammered by increases to stamp duty, and the “time and complexity of getting on site following planning approval”.
Shares tumbled 5% following the announcement, with fellow housebuilders Persimmon, Bovis and Taylor Wimpey also dragged into the red.
It comes at a time when the Government is attempting to increase the rate of housebuilding in an effort to ease the housing crisis.
Berkeley still expects forward sales above £2 billion this year and the group reaffirmed its guidance to deliver at least £3.3 billion of pre-tax profits for the five years to April 2021.
The group has previously warned over political uncertainty, including Brexit, hanging over the property market.