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Berkeley Group, one of the UK’s largest housebuilders, has bought its first new sites in more than two years as it bets on a market recovery after a brutal period for big developers.
The FTSE 100 group, which builds 10 per cent of London’s new homes, said it had bought land for 220 units in Berkshire, as well as a second site this week, its first purchases since early 2022.
Chief executive Rob Perrins said the market was nearing a “point of inflection” thanks to policies unveiled by the new Labour government and improving economic conditions, after a long downturn in the sector caused by high mortgage rates.
“I don’t think I have seen a government who have put that much weight on building 1.5mn homes. They are on the right path and have done a good job so far,” said Perrins, a 30-year veteran of the industry.
Berkeley’s optimism came despite reporting that profits in the half-year to October slipped 7.7 per cent to £275mn. Shares in the group fell 1 per cent in early trading in London.
Shares in housebuilding firms, including Berkeley, have sold off heavily since the UK Budget in October over fears of resurgent inflation and higher government debt levels driving up borrowing costs.
Perrins brushed off these concerns. “The Budget was probably a blip,” he said. “Inflation is now pretty well out of the system. We are not seeing build cost inflation. We are beginning to see the feelgood factor coming back into the market.”
However, he cautioned that the increase in taxation unveiled in the Budget — and plans to impose a further levy on housebuilders to fund building safety work — were giving international investors pause.
House prices have picked up in recent months, with data from mortgage lender Halifax on Friday showing a 1.3 per cent increase in November, the fifth month of gains, taking the year-on-year rise to nearly 5 per cent.
Paul Dales, chief UK economist at Capital Economics, said house prices were boosted by a “relief rally or release of pent-up demand after the Budget”, which had “more than offset the latest rise in mortgage rates”.
Mortgage costs experienced some volatility around the Budget, with several lenders raising their rates. But analysts still expect rates to decline in the coming year.
Housebuilding in London has contracted sharply, due to borrowing costs and new fire safety regulations. The UK capital registered about 8,500 housing starts in the year to June, according to government data, down 60 per cent and roughly a tenth of its 80,000 annual target.
Berkeley said it was on track to hit profit guidance for 2025 and 2026, and unveiled a new 10-year strategy, including plans to spend £2.5bn on land. These plans increased near term investment by 40 per cent compared with previous internal plans, Perrins said.
