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 improvement 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 improvement throughout the trade. However they’re a very troublesome for personal residential builders in London, which had been already struggling to compete within the land market, in keeping with Rob Perrins, Berkeley’s chief government.
He stated tariffs on housebuilders to ship new inexpensive housing, enhance infrastructure and guarantee improvement was environmentally pleasant made competing with workplace or warehouse builders more and more troublesome.
“Due to taxes on residential, different makes use of have increased worth: motels and industrial in zones 1 and a pair of and industrial in zones 3-6 . . . that’s why personal housing begins have halved since 2015, and I believe will halve once more,” he added.
Work began on 16,673 new properties within the capital final 12 months, fewer than half the 33,792 began in 2015, in keeping with information supplier Molior London. Mayor Sadiq Khan has targeted his efforts on boosting inexpensive housing begins, that are up over the identical interval.
Regardless of the additional prices, Berkeley stated it anticipated to ebook a pre-tax revenue for the 12 months to the top of April 2023 of £600mn, up from £552mn within the earlier monetary 12 months and in keeping with expectations.
Berkeley’s share worth rose 4 per cent to £35.92p on Tuesday, recovering from a dip final week after analysts at HSBC predicted home costs in London might 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 properties for greater than it had anticipated.
The corporate advantages from a robust stability sheet and the power undersupply of homes within the UK, in keeping with 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 observe.
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 would 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 worth efficiency. The plan was permitted at Tuesday’s AGM, however 40 per cent of shareholders voted towards it.
