Proactive Investors - Berkeley Group Holdings PLC (LON:BKGH) move into build-to-rent (BTR) is a strange move suggests Citigroup and is likely to lead to more questions about medium-term prospects.
Unveiled alongside its latest annual results, Citi said the move by the London-focused housebuilder overshadowed a reassuring 2024 performance and resilient 2025 guidance.
“Although this approach looks to maximize returns by accelerating the build-out of its sites, the strategy puts a spotlight on the structural challenges which may not have an easy fix, even with lower rates and a better planning backdrop.
“On the demand side, management noted widening in bulk discounts to retail prices required by PRS (private rented sector) investors which in our view is a reflection of both higher funding costs and the emergence of fully forward-funded models such as Vistry.
“On the supply side, London's land viability pressures amidst high planning costs continue to drive caution dampening the medium-term pipeline.”
While modest in scale, the BTR shift will weigh on investor sentiment with the value unlock not as obvious at this stage, Citi concluded.
Shares in Berkeley today were flat at 4,698p.