Builder Berkeley warns of Brexit impact despite profit leap

[LONDON] London-focused housebuilder Berkeley posted a better than expected 53 per cent profit leap on Wednesday but warned that tax rises on top-end properties had muted new construction and Brexit could harm the sector in the months ahead.

Berkeley, which reported pretax profit of £812 million (S$1.42 billion) in the 12 months to April 30, warned that Britain's exit from the European Union could lead to a prolonged period of uncertainty in the sector.

"Brexit and wider global macro instability impact both confidence and sentiment and will result in constrained investment levels," the company said.

"This leads to greater uncertainty around the timing of delivery of homes from our land bank." Increases to stamp duty, which is levied in bands according to the market value of a property, began to hit the London market from early 2015, leading to big drops in demand and prices in the city centre, where Berkeley has several developments.

A further increase for those buying second homes and buy-to-let properties delivered another blow to demand in a market where many sales are driven by foreign investors.

Chief Executive Rob Perrins also warned that Britain must continue after Brexit to secure the supply of European labour, which accounts for half of workers on London's building sites, to address a decades-long housing shortage.

Without transitional rules for European labour the company cannot say with certainty that it will be able to build homes in two years' time, Mr Perrins said.

"By nature, you will invest less in that environment."

REUTERS