Berkeley freezes investment in UK housing market as rates weigh

BERKELEY Group Holdings said it has halted investment in new projects as high interest rates grip the UK housing market.

The developer said it chose not to acquire any land from May through August, citing ongoing issues in the planning system, persistent inflation and high interest rates, according to a statement on Friday (Sep 8). Berkeley reported a 35 per cent drop in the value of new home reservations in the period compared with the rate the previous year.

UK households are facing greater costs triggered by higher borrowing costs and inflation that has reached generational highs. With properties remaining out of reach for many potential buyers, the nation’s biggest developers have issued a series of downbeat statements this summer.

Britain’s four largest listed homebuilders have seen their market capitalisations tumble this year, with Persimmon dropping out of the FTSE 100 last week on the back of a slump in first-time buyer sales. Barratt Developments, Persimmon and Taylor Wimpey, which collectively built more than 45,000 homes last year, are expected to complete fewer properties in 2023 as high rates crush demand.

However, Berkeley – which builds far fewer homes per year than its main three rivals, and focuses on more affluent customers in London and the south-east of England – said pricing remains resilient and above its business plan levels due to the constrained supply of homes in the market, while cancellation rates are stable. 

Berkeley reaffirmed its earnings guidance to deliver pre-tax profits of more than £1 billion (S$1.7 billion) across the current and next financial years, supported by a “strong opening forward sales position”. Still, the company said issues in the planning system coupled with uncertainty for the UK economy were impacting the housing market, deterring investment into brownfield regeneration. BLOOMBERG