Analysts predict the company will report pre-tax profits of around £550 million, marking a 9% year-on-year decrease, which aligns with the firm’s previous guidance
Berkeley Group, the London-listed housebuilder, is bracing for a near 10% drop in pre-tax profit as it grapples with dwindling demand.
The firm, known for its premium homes, will reveal its full-year results on Wednesday. Despite the anticipated slump, industry insiders believe Berkeley will fare better than its struggling rivals.
Analysts predict the company will report pre-tax profits of around £550million, marking a 9% year-on-year decrease, which aligns with the firm’s previous guidance. Aarin Chiekrie, an analyst at Hargreaves Lansdown, commented: “UK housebuilders have been on the back foot in recent years, struggling against a period of inflationary and regulatory challenges. Berkeley hasn’t managed to avoid these issues, but it appears to have dealt with them better than most.”
Chiekrie noted that Berkeley’s focus on London and high-end properties, with an average sale price of £624,000, sets it apart from other large housebuilders. He also pointed out that high mortgage rates have led to “a relative lack of urgency among some buyers”.
In its last update, Berkeley revealed a one-third year-on-year drop in sales rates. Recent industry data suggests that a brief surge in buyer confidence has now reversed. A net balance of 8% of property professionals reported a drop in home buyer demand in May, the weakest since November 2023, according to the Royal Institution of Chartered Surveyors (Rics).
This downturn comes as the Bank of England is expected to delay a cut to interest rates next week. Initially, experts predicted that the Bank might lower the base rate as early as May, which would have reduced mortgage rates and boosted the housing market.
However, due to ongoing high inflation, particularly in the jobs sector, it’s now anticipated that the central bank won’t reduce rates until at least August. Other housebuilders are also struggling.
Crest Nicholson has announced that its annual profits are set to plummet by about a third this year, as challenges in the housing market continue longer than anticipated. The company also confirmed that last month it turned down two takeover bids from rival Bellway, one of which was valued at £650 million.
The housebuilding sector is experiencing a wave of consolidation due to the weakening market. Earlier this year, Barratt acquired Redrow, and Vistry purchased Countryside in 2022. Regarding Berkeley, Mr Chiekrie noted: “Net cash levels will also be in focus.”
“Back at the half-year mark, these were comfortably ahead of full-year targets, opening the door to feed cash back to shareholders through increased dividends and share buybacks.”
