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FTSE 100: Berkeley profits dip as house prices fall

Berkeley  Up on the roof of one of 32 new houses being built at Knowle Village near Fareham Hampshire
Berkeley has been hit hard by the housing market dip. Photo: PA/Alamy

Housebuilder Berkeley Group's (BKG.L) pre-tax profit sank 2% to £284.8m ($348.8m) in the six months to the end of October as it slowed down new development in response to a cooling housing market.

The London-focused housebuilder said sales during the current six-month period were 2% ahead of last year but since the end of September they were 25% lower than levels for the first five months of the financial year.

Berkeley delivered 2,080 homes over the period ⁠— 10% of London’s new properties ⁠— at an average price of £560,000 compared with 1,828 homes at £647,000 a year before.

Read more: House prices: Should you buy or sell your house next year?

Berkeley made a pre-tax profit of £284.8m for the six months to 31 October, up from £290.7m in the first half.

The group kept its pre-tax earnings guidance for the full year firmly cemented at £600m, but lowered its estimates for the following two years from £1.25bn to £1.05bn.

“The current operating environment, characterised by record levels of planning tariff within an increasingly complex and slow planning system, at a time of high build costs, increased regulation and higher corporation tax, alongside the Residential Property Developer Tax and proposed new Building Safety Levy, will inevitably continue to see a reduction in supply of new homes in London and the South East,” chief executive Rob Perrins said.

“Berkeley is battening down the hatches in view of a tightening economic environment, but remains supported by its exposure to London and the South East," Richard Hunter, head of markets at Interactive Investor, said.

Read more: House prices squeezed by higher mortgages as rents rise

"Following a host of activity, the group is now looking to generate value from its existing assets, with the likelihood of limited new investments.

"The bar for any such acquisitions has been set high and includes the additional taxes and levies on the industry which will inevitably crimp margins, meaning that Berkeley is likely for the time being to only purchase on an exceptional basis."

Watch: House prices drop at fastest rate since pandemic after mini-budget chaos