Homebuilders hesitating amid political turmoil, Berkeley says

Homebuilders in London have been hesitating to embark on new projects despite a thirst for property in the capital, developer Berkeley Group has warned.

The company said the extended Brexit deadline, adding to three years of uncertainty for the sector, and next week’s General Election have put pressures on developers.

“This is damaging to our economy and London where fewer developers are prepared or able to accept the high operational risk of bringing forward new homes, with supply falling as a consequence,” Berkeley said in a statement.

It came as the company reported a drop of almost a third in pre-tax profit to £277 million in the first six months of the financial year. Revenue dipped nearly 44% to £931 million.

However, management had been expecting what otherwise would have looked like poor results, signalling to investors well in advance there would be a drop.

As a result shares were up by 0.29% to 4,562p.

On Friday the company said that the drop was “anticipated and reflects the completion of a number of Central London developments acquired in the period from 2009 to 2013”.

The business said that overseas investors were still interested in property in the capital, and Berkeley’s sales are still fairly evenly split between investors and those who want to own their homes.

The cost of building is rising at around 4% a year.

But the uncertainty that is caused by Brexit, and other events, might be a boon for Berkeley, chairman Tony Pidgley explained, saying his business could capitalise on the caution of some of its rivals.

“Looking forward in London, Berkeley is now one of very few remaining developers delivering long-term regeneration programmes at scale, due to the complexity of bringing these sites through the development process, their high capital requirements and the uncertain macro conditions that have seen others step back, despite the city’s undersupply of housing,” he said.