House sales to stay ‘subdued’, warns Berkeley, as reservations slump

It comes after a raft of rival housebuilders have also cautioned over weakness in the market in the face of soaring interest rates and tighter household finances.

“During the last six months, macro volatility has increased, domestically and abroad, with the prospect of UK interest rates remaining higher for longer and weak economic growth projections,” the firm said on Friday morning.

“We anticipate the sales market will remain subdued before inflecting in its normal cyclical manner once there is greater confidence in a downward trajectory for interest rates and economic stability returns.”

Berkeley also said it completed fewer homes over the latest period, delivering 1,785 homes, as well as 204 through joint ventures, over the six months to October 31.

This dropped from 2,080, and 251 from joint ventures, over the same period last year.

Nevertheless, Berkeley also revealed that pre-tax profits grew by 4.6% to £298 million for the six-month period, compared with a year earlier.

In the firm’s update to shareholders, bosses were also critical of UK planning and regulation rules.

Rob Perrins, chief executive, said: “Despite urban regeneration being a clear national priority, it has become increasingly difficult to progress this form of development as changes to planning, tax and regulatory regimes have created an increasingly uncertain, unpredictable and burdensome environment.

“This is driving investment away from urban areas, restricting growth and preventing homes and other tangible benefits being delivered.”

Responding to the latest figures, Richard Hunter, Head of Markets at interactive investor, said Berkeley “is making some tough choices in a tough environment and the strategy is currently keeping the group in resilient shape”.

Mr Hunter added: “Against the parlous backdrop which the sector is facing, ranging from rising interest rates to doubts over mortgage availability and affordability, the current sales climate is inevitably on the wane.

"Berkeley has added to this list, citing the planning and regulatory environment as another reason why it is not currently investing in new developments.

"Indeed, the increasingly toxic combination of persistent inflation and the propensity of consumers to buy given the tightening economic environment and a rising interest rate environment have filtered through to lessening demand, with net reservations having fallen by a third, leaving the group to focus on its current and immediate order book and sites.”

But he added the company appears to be performing well in the circumstances.

“The group’s upgrade to its medium-term outlook gives both extra visibility and comfort to investors, who have so far been rewarded for their patience. Over the last year, the shares have risen by 29 per cent, as compared to a marginal gain of 0.6 per cent for the wider FTSE100, a performance which is in sharp contrast to many of its peers.”