The housebuilder Berkeley Group has said demand from buyers for its homes has held up, although many prospective purchasers are biding their time until they get more certainty about rising interest rates.
The company said it was still seeing “good levels of inquiry for well-located homes” but added that the housing market was “likely to lack urgency” until consumers had a better idea of how mortgage rates will change over the coming months.
Berkeley – which operates across London, southern England and Birmingham – reported a near-10% jump in pretax profit in the 12 months to the end of April, but said current trading suggested sales would be about 20% lower in the current financial year.
Mortgage rates have soared in recent weeks, as the Bank of England’s attempts to cut stubbornly high inflation have fed through into lending deals, pushing the average interest on a two-year fixed loan above 6%.
Official inflation figures for May, which were released on Wednesday morning, showed inflation as measured by the consumer price index had unexpectedly remained unchanged at 8.7%, increasing expectations that Threadneedle Street will raise interest rates further on Thursday.
Berkeley’s share price fell 2% in early trading on Wednesday, as investors were surprised by the inflation figures and sold off shares in housebuilders. Shares in rivals Barratt, Persimmon and Taylor Wimpey also fell, amid concerns in the housing sector about rising mortgage rates.
Berkeley said the “near-term market outlook” was “therefore uncertain”, as it had been since September 2022, when Liz Truss’s ill-fated mini-budget first sent mortgage rates soaring.
The company said that uncertainty meant many prospective homebuyers would wait to see what happened and that those choosing to buy a new property were either existing homeowners who wanted to move, or investors with available funds.
Berkeley said these buyers tended to favour housing developments that were closer to being finished, rather than projects two to four years away from being completed. It said its forward sales were worth a “healthy” £2.1bn, but the value of those reservations was 15% lower than in the previous financial year.
The company reported profits of £604m in the 12 months to 30 April, an increase of nearly £53m on the £551m it reported a year earlier. It said current trading would allow it to stick to its plan of delivering just over £1bn of profit during the next two financial years.
after newsletter promotion
Berkeley, which specialises in redeveloping brownfield land, said it would continue to invest in its existing regeneration sites. However, its chief executive, Rob Perrins, said the economic environment meant it would remain cautious in committing to new investment until the conditions for growth were in place.
Perrins added that the company was facing further challenges from “the uncertainty from a continually evolving and increasingly burdensome regulatory environment”, and he called on ministers to ensure the planning system had better understanding of such developments, in order to keep building new homes.
