Housebuilder Berkeley slows down new UK developments

Berkeley Group, the London-focused housebuilder, is slowing down new development in response to a cooling housing market and new levies on the industry.

The FTSE 100 group cut its future earnings guidance as it pointed to clear evidence that housing sales were slowing, as buyers assessed the impact of higher mortgage costs.

The sales rate had fallen by about a quarter in recent weeks, said Berkeley in its results for the six months to the end of October, and the company was looking at “matching supply to demand”.

Berkeley reiterated that full-year pre-tax earnings would be about £600mn, but lowered its estimates for the following two years from £1.25bn to £1.05bn.

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Higher borrowing costs, lower availability of mortgage costs and a planning system in disarray were likely to weigh on the market for the foreseeable future, warned chief executive Rob Perrins.

He predicted a slowdown in sales rather than a crash. “This is not a 2008/9 crash, which was [caused by] unemployment and weak banks. This time we’ve got full employment and very strong banks . . . it’s more like the dotcom crisis or the Iraq war: a tougher cycle,” Perrins said.

Berkeley developed a reputation for timing the housing cycle well during the financial crisis, and indicated a more conservative approach in future. The company said it would focus on “cash generation” in the years ahead.

“We’re not going to build more than we can sell in that period. It’s a reflection of the macroeconomic environment and the recession that’s to come,” said Perrins.

Housebuilders have also warned that development will slow as a result of new or increased taxes, with housing secretary Michael Gove taking a combative stance to the sector.

Berkeley and other developers are assessing the impact of an increase in corporation tax to 6 per cent, a new 4 per cent residential property developer tax and proposals for an additional building safety levy which Gove hopes could raise £3bn to fund remedial works on unsafe homes.

This week, Gove and Prime Minister Rishi Sunak watered down mandatory government housing targets in a bid to appease Conservative rebels who have criticised them as “Stalinist”. That gives local councils a freer hand to block proposals and slow the pace at which they release land for new homes.

Neil Jefferson, managing director at trade group the Home Builders Federation, was highly critical of the move. “If ministers fail to stand up to the anti-business and anti-development section of the Conservative party it is inevitable that housing supply will fall dramatically, costing hundreds of thousands of jobs, slashing GDP and preventing even more people from accessing decent housing,” he said.

Perrins also hit out at the decision, which he said would make planning less predictable. “It will take two years to [implement the change] and two years to undo it: a slowdown in investment for four years,” he said.

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