Berkeley reveals no let up in surge of new home demand in London and the South East as profits rocket £60m helped by an average £600k sale price
- Berkeley saw profits climb by £59.7m to £482.4m in the year ending 30 April
- The firm sold 42% more homes last year and increased revenues by £145.8m
- Its London home sales have benefited from the opening of the Elizabeth Line
Berkeley Group has reported another bumper set of annual results following a jump in home purchases across London and the South East of England.
The FTSE 100 company saw profits climb by £59.7million to £482.4million in the year ending 30 April, as it continued to benefit from a UK property market underpinned by high demand, undersupply and low mortgage rates.
The Surrey-based firm noted that demand for homes in the capital city had been helped by the loosening of Covid-19 restrictions, the rebound in office-based working and the recent opening of the Elizabeth Line.
As a consequence, it managed to sell 42 per cent more homes than in the previous year and increased revenues by £145.8million, despite selling new properties at a lower average selling price of £603,000.
Healthy results: Berkeley Group saw profits and revenue grow as it continued to benefit from a UK property market underpinned by high demand and severe undersupply
Such is the steep price of new homes, though, that it offset the extra costs Berkeley incurred from sourcing building materials, employing workers, and other supply chain issues.
The value of underlying sales reservations also leapt by a quarter to ‘slightly ahead’ of pre-pandemic volumes, while forward sales at the end of April were up by around £500million to £2.17billion.
Berkeley claims the fundamentals of its housing market ‘remain strong,’ even against a backdrop of surging property prices and interest rate hikes, due to an undersupply of housing in London and South East England.
It pointed to UK Government data showing that only 39,000 homes had been delivered in the capital over the past three years, compared to an annual housing need of 94,000.
Berkeley attributed the majority of the growth in forward sales to its acquisition of National Grid’s 50 per cent stake in the St William Homes joint venture in March.
The £412.5million purchase meant the group took ownership of 24 sites containing over 20,000 future homes, one of which is a new development on Prince of Wales Drive in Battersea.
New railway: Berkeley Group noted that demand for its new homes in the capital city had been helped by the recent opening of the Elizabeth Line
Alongside this, the business added four new sites to its land holdings, including a Peckham shopping centre, the former Ram Brewery site in Wandsworth, and land in Milton Keynes, where it has won planning permission to build 4,600 new homes and 403,000 square metres of logistics space.
Chief executive Rob Perrins said: ‘These strong results reflect the stability of our uniquely long-term operating model throughout an exceptionally volatile period.
‘They are underpinned by our portfolio of major brownfield regeneration projects, where patient and sustained investment is transforming disused land into distinct and highly sustainable mixed-use neighbourhoods within the UK’s most undersupplied markets.’
The housing developer told investors that it forecasts pre-tax profits of around £600million this year, followed by £625million in the two years afterwards. In addition, they intend to return £282million to shareholders each year until 2025.
Yet despite the exceptionally healthy outlook, Berkeley Group shares closed trading 3.1 per cent lower at £36.76 in on Wednesday. Like many other UK property firms, its shares have tumbled this year amid rising economic uncertainty and a recent slowdown in property transactions.
Mark Crouch, an analyst at investment platform eToro, commented: ‘Annual house price growth is tipped to halve by the end of the year as a toxic combination of runaway inflation and rising interest rates hit housing demand.
‘Berkeley’s numbers are solid, but its share price, which is down more than 23 per cent since the start of the year, suggests that investors are worried about market conditions.
‘While that is clearly a concern, Berkeley has a strong balance sheet, and so we expect it to be able to weather any slowdown in the wider housing market.’