Berkeley unable to boost construction of new homes

Grant Prior 6 months ago
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Housing giant Berkeley is warning that market conditions are hampering any plans to boost construction of new homes beyond current levels.

In a trading statement today the firm said: “The market conditions in London and the South East are unchanged from the first half with home movers and downsizers continuing to be constrained by high transaction costs, the 4.5x income multiple limit on mortgage borrowing and prevailing economic uncertainty.

“In addition, domestic buy-to-let investors, who buy early in the cycle and provide security of cash flow to enable complex, capital intensive developments to be brought forward, are further impacted by additional transaction costs and the removal of interest deductibility.

“These factors, together with the changing planning environment and the time and complexity of getting on site following planning approval, mean that Berkeley is currently unable to increase production beyond the business plan levels.”

But the company confirmed that it is still on course to make “at least £3.3 billion of pre-tax profits for the five year period from 1 May 2016 to 30 April 2021.”

Berkeley added: “The fundamentals of the market in London and the South East remain compelling, but the operating environment and its impact on transaction volumes, whilst sufficient for the business plan and five year profit guidance period that ends at 30 April 2021, do not support the step-up in Berkeley’s production levels that these markets so badly need.”

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