- The FTSE 100 company revealed reservation levels were about a third lower
- Higher interest rates have discouraged Britons from purchasing new homes
- Moneyfacts: An average two-year fixed rate mortgage now stands at 6.02%
Berkeley Group has warned that it expects home sales to ‘remain subdued’ due to heightened economic volatility.
The FTSE 100 firm revealed reservation levels were about a third lower in the six months ending October as high interest rates discouraged Britons from purchasing new properties.
Homebuying demand has been under pressure from 14 consecutive Bank of England rate hikes, hindering mortgage affordability and availability.
Weak market: Berkeley revealed reservation levels were about a third lower in the six months ending October as high interest rates discouraged Britons from purchasing new properties
An average two-year fixed rate mortgage has subsequently increased to 6.02 per cent, while a five-year deal now stands at 5.63 per cent, according to data provider Moneyfacts.
Berkeley has reacted to the weaker trading conditions, which worsened after the mini-budget fiasco of September 2022, by focusing on forward sales and restricting new land investment.
As a result, the Surrey-based company’s pre-tax profits of £604million in the last financial year were commensurate with guidance.
Berkeley anticipates achieving a combined £1.5billion in pre-tax profits across the current and following two fiscal years, as well as net cash of £400million.
In the recent half-year trading period, its profits rose by 4.6 per cent despite total revenue dipping to £1.92billion as home sales across London and the South East declined by almost 300 to 1,785.
The group told investors: ‘We anticipate the sales market will remain subdued before inflecting in its normal cyclical manner once there is greater confidence in a downward trajectory for interest rates and economic stability returns.’
Alongside this, Berkeley’s chief executive reiterated his criticism of the UK’s planning and tax system for holding back home construction.
Chief executive Rob Perrins said it was very challenging to complete any form of urban regeneration development amidst an ‘increasingly uncertain, unpredictable and burdensome environment.’
Fewer than 235,000 homes were built in Britain during each of the last two years, far lower than the UK Government’s target of building 300,000 houses per annum.
Charlie Huggins, Wealth Club’s head of equities, remarked: ‘Given the chronic housing shortage, the government should take a long hard look at whether it could do more to incentivise urban regeneration.
‘The message from Berkeley is clear – without changes to the planning and regulatory environment, it won’t invest. That’s not good news for anyone, least of all London’s future home buyers.’
Berkeley’s results come a day after mortgage lender Halifax revealed UK house prices grew for the second successive month, rising by 0.5 per cent to £283,615 in November.
Berkeley Group Holdings shares were 1.8 per cent, or 87p, lower at £48.53 on Friday morning but have still risen by around a quarter since the year started.