igh-end housebuilder and developer Berkeley Group has flagged high inflation and interest rates weighing on the sector as it reported a slump of more than a third in home reservations.
But the group stood by its profit expectations despite its gloomy outlook for the UK economy.
Underlying private sales reservations – when a buyer reserves a property for a period of time – were down about 35% in the latest quarter compared to last year’s rate, it told investors.
The slump reflects the more volatile economic and political environment, Berkeley said.
Property prices have risen above its “business plan levels”, due to fewer new-build and second-hand homes to meet demand in the market, it added.
Berkeley Group continues to fine-tune its operations against a notoriously difficult backdrop for the sector
The company, which builds homes across London, Birmingham, and the South of England, also told investors it had not bought any land over the latest quarter and will only invest very selectively in new opportunities.
“The complexity and protracted nature of the current planning system and lack of clarity surrounding certain regulatory changes affecting our sector, at a time of considerable uncertainty for the UK economy with persistent high inflation and interest rates, continues to deter investment into brownfield regeneration and the wider housebuilding sector”, the group said.
Nevertheless, Berkeley stuck to its earnings guidance of at least £1.05 billion in pre-tax profits over the 2024 and 2025 financial years.
It expects forward sales – an important indication of housing demand – of around £2 billion at the end of October, down from £2.14 billion at the end of April.
Richard Hunter, head of markets at Interactive Investor, said: “Berkeley Group continues to fine-tune its operations against a notoriously difficult backdrop for the sector.
“In some ways, Berkeley is a different beast to many of its competitors, with a potential edge coming from its mix of an exposure to London and the South East, higher-end properties and the regeneration of brownfield sites in which it is well accomplished.”
Berkeley’s update come after rival housebuilder Barratt Developments said it was cutting the size of its workforce by hundreds due a slowdown in the housing market, “accelerated following the mini budget” under former prime minister Liz Truss.
The business said the price of building a house had been increasing more rapidly than the price for which a house can be sold.