‘Toxic’ market sees Berkeley cut new builds

Berkeley Group will put a brake on new developments after sales fell in recent weeks in another blow to the housing market.

The homebuilder sounded the alarm about a cooling market and a “toxic” mix of challenges facing the industry.

Berkeley revealed that sales in the five weeks since September were 25 percent lower than the previous five months.

As a blow to the government, the FTSE 100 company pointed to a number of problems, including a complex and slow planning system, higher costs, increased regulation and the 6 percent increase in corporate tax.

It also warned that the proposed construction safety levy, which is designed to raise £3bn, would hurt the industry.

The combination of challenges will ‘inevitably’ lead to a reduction in the supply of new homes in London and the South East, resulting in fewer land holdings, Berkeley revealed. This despite a structural shortage of new homes in the capital, the company added.

Chief executive Rob Perrins said, “We are positioning the company to reflect the current environment until the conditions for growth are in place to support responsible, sustainable investment.

“We are experienced in operating in times like these and will focus on generating value from our existing assets with limited new investment, matching supply and demand and generating cash. London is the most beautiful and dynamic city in the world, but it is currently not attracting the necessary investment from private or public sources, including in infrastructure and affordable housing, to open up more brownfields and to address the systematic undersupply of new housing.’

Mark Crouch, an analyst at broker eToro, warned that the results “may bode well for the broader housing market.”

He added: “There are some warning signs that investors will be concerned about.

“Higher mortgage rates will reduce demand for real estate, which means we could have already seen the high water level for the housing market.”

Berkeley said profits fell 2 percent to £285 million in the six months to the end of October. Sales also fell slightly to £1.2bn, but cash payments for forward sales completed within the next three years were £2.3bn from £2.2bn.

Shares rose 0.3 percent, or 12 pence, to 3,810 pence yesterday.