Luxury developer Berkeley bullish about resilience in high-end property market

Group reaffirms its profit forecast, despite higher borrowing costs and falling house prices

The Berkeley Group specialises in luxury developments such as the Astor at 9 Millbank, London. Photo: Berkeley Group

Luxury property developer Berkeley Group has restated its profit forecast, despite the overall downbeat picture with the UK housing market.

Even though earlier this week, the Halifax house price index reported a 4.6 per cent annualised fall in home prices in August, Berkeley repeated its pre-tax profit guidance of £1.05 billion ($1.3 billion) for its 2024 and 2025 financial years.

Because it favours creating luxury and prime properties and tends to concentrate on London, Berkeley is considered to be in a better position to weather the storm currently blowing the wider UK housing market.

But given that the group reported a 35 per cent fall in private sales reservations between May and August, analysts say it is not totally immune to that tempest.

“Demand in the capital’s likely to remain more robust than other areas of the country, but in the short term, there’s plenty of stormy clouds for Berkeley to weather,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

Berkeley, which specialises in turning industrial sites into high-end property, did not acquire new land in the May-August period, preferring to concentrate on pipeline projects given the gloomy economic conditions

“Considerable uncertainty for the UK economy, with persistent high inflation and interest rates, continues to deter investment into brownfield regeneration and the wider house-building sector,” the company said in its trading statement.

Forward sales

“The cash position remains strong which provides a potential buffer against a punishing background and a progressive dividend policy seems likely to be followed, even if the current yield of 3.2 per cent is pedestrian compared to some of its peers,” said Richard Hunter, head of markets at Interactive Investor.

“The group has also noted that build-cost inflation is at 'negligible' levels across the portfolio and that forward sales remain robust.”

Nonetheless, going forward Berkeley's sales projections illustrated that even at the luxury end, demand is being affected.

The group expects its forward sales by the end of October to be about £2 billion pounds, compared with £2.14 billion at the end of April.