Berkeley on-course to hit financial predictions

Berkeley added it remains on course to deliver £2bn of pre-tax profit in aggregate over the three years culminating in 2017/18.

The group, which focuses on luxury developments in London and the South East of England, said trading conditions are positive in the housing market, in spite of global macro uncertainty.

“Reservations are approximately 4% lower than in 2014/15 due to a change in mix of product and the strength of the forward sales secured in recent years,” Berkeley said.

“In spite of global macro uncertainty, including the impending UK European Referendum, underlying demand has remained strong. Transaction levels at the upper end of the housing market have been affected by the significant increase in transaction taxes over the last 18 months which will have consequential effects on both social mobility and the supply of new homes.”

The housebuilder said that, since its interim results in December, it has sold 62 properties priced over £2m, in line with a year earlier, when the high-end UK market slowed in the run-up to the country’s general election.

Berkeley said it welcomed the UK government’s intentions to address the supply-demand imbalance in the housing market, but was concerned that a number of policies were “complex and sometimes conflicting”, adding there were “competing demand on limited and reducing public sector resources” and the UK has “one of the world’s highest property taxation regimes”.

In recent months a handful of hedge funds have shorted Berkeley, citing the increasing slowdown at the top of the London residential market. However, analysts at Jefferies this morning said the funds may be misguided.

Jeffries said: “We continue to believe that Berkeley’s shares are not the appropriate financial instrument to short in order to play the theme of alleged oversupply of high-value homes in the Nine Elms and Battersea area. “After all, Berkeley has completely sold out its Nine Elms development, Riverlight, already,” added Jeffries. “Yes, Berkeley still has developments in the Battersea area, but it is not a pure play. Nor does it, in our view, have significant exposure to the markets that are causing some to be concerned.” Propertyweek.com