Housebuilder Berkeley Group has warned of Brexit “headwinds” harming the UK housing market’s prospects for growth, with London and the south east particularly affected.
However, it expects to post strong financial performance for the four months to the end of August, the construction firm said in a trading update it will share at its annual general meeting later today.
While pricing has remained robust, with demand for high quality homes, Berkeley warned that the housing market “lacks urgency”.
“London remains constrained by high transaction costs, restrictive income multiple limits on mortgage borrowing and prevailing economic uncertainty, accentuated by Brexit,” it said in its update.
“These headwinds affect all segments of the market from home movers to down-sizers and investors alike.
“A functioning housing market, where good new development can deliver much needed additionality across all tenures, requires conditions for growth and low barriers to entry which are currently absent from the housing market in London and the south east.”
The news comes as mortgage approvals fell to 65,000 for July, sparking fears of a lull in the housing market, with experts fearing the Bank of England’s interest rate hike will put off more buyers.
Despite the housing market slump, Berkeley bought five new sites between May and August, and anticipates that net cash for its half year will be higher than its year-end holdings of £687m.
It is on track to pay shareholders a dividend of 33.3p per share later this month, and expects to deliver a six-monthly return of £139.2m - or £1.06 per share - by March next year.
The firm is sticking with guidance that suggests it should deliver at least £1.58bn in pre-tax profit for the two years ending 30 April 2019.
Rival builder Redrow yesterday warned of uncertainty surrounding the future of the government’s Help to Buy scheme, but Berkeley’s last full-year results show it sold just 157 homes through the initiative.
Shares ticked upwards by almost one per cent on the update in early morning trading to hit £35.44.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said that given fears about Brexit's impact on London's property market, "no news is good news".
"London property prices are holding up, but purchases are low on the ground with high transactions costs, restrictive mortgage conditions and economic uncertainty all playing a part," he said.
"Those aren’t new conditions though, and Berkeley seem to have anticipated them, with guidance broadly unchanged. The fact the group is still finding investment opportunities, acquiring five new sites so far this year, is also somewhat encouraging. Still, housing market immobility is a worrying trend, and it’s difficult to see what Berkeley can do but batten down the hatches and wait for things to get moving again.”