Berkeley Group posted a 25.7% fall in first-half pre-tax profit to £401.2 million. The house builder cited uncertainty surrounding Brexit in the near-term as the reason behind the fall in earnings.
Some potential customers are holding off purchases until the political situation is cleared up. The housing market in London and the South East ‘lacks urgency’, and that is an issue, given that is where the company conducts the majority of its work. Building costs are stable at approximately 4% per year, but costs could vary majorly depending on what sort of Brexit deal is struck.
Looking beyond the near-term, the company is more confident in its outlook as the two-year guidance is unchanged, and that is key for investor sentiment.
The home builder posted impressive full-year figures in June. Earnings were £934.9 million – a record level. Average selling price ticked up by 5.9%, which masked the fact the number of properties sold actually fell by 9.44%. The drop in properties sold underlines dwindling demand. The company warned that it might have reached ‘peak’ profit, and annual profit for this financial year could be 33% below last year’s figure.
The house builder cited uncertainty in relation to Brexit, higher stamp duty on investment properties, and more stringent rules regarding mortgages as the reason for the lower profit forecast. The high-end property developer rode the London property wave for years, and now it appears the boom times are over. Berkeley Group, have traditionally been London and South East focused, but now they are branching out into Birmingham – as sign that the London market has come off the boil.
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