In a trading statement ahead of its AGM today Berkeley Group said reservation activity for new homes remained 20% down on past year – reflecting fewer available homes and market uncertainty.
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In particular, Berkeley stressed that the tension between the national Starter Homes policy and London mayor Sadiq Khan’s affordable housing ambitions coupled with higher transaction taxes and the high rates of the Community Infrastructure Levy “now pose a significant threat to development viability”.
After a hiatus either side of the referendum, reservations have returned to the relative levels of the first five months of 2016, around 20% down on 2015 levels.
Home values in London will fall for the first time since 2009 next year, according to Countrywide Plc.
“Government policy, which has been helpful outside London, has had a negative effect on the capital”, Berkeley said.
“This is not just a problem for business and ordinary people in the capital but for the country as a whole – London is the engine of our national economy and the principal driver of fiscal revenues”.
The company said it planned to expand building in the current year.
And the impact has also been felt on the ground, with Berkeley last week halting construction at a luxury housing project in southwest London, where homes were expected to sell for up to 5 million pounds ($6.7 million), without saying why.
Housebuilders were some of the top risers this morning after big-hitter Berkeley Group said it would meet targets and Redrow posted record results. The shares were relatively unmoved this morning.
Profits in the year to June rose by 23% to £250mln, while orders surged 54% to £807mln.
Redrow also said that it had seen a small rise in cancellations in London from investors buying properties who became nervous in the wake of Brexit, but that had now tailed off, with the CEO blaming any London slump on stamp duty.
There is no change to profit guidance, with the group still targeting £2bn of pre-tax profit over the three year period to 30 April 2018, as the group’s forward sales provide good visibility over the next two years.
Chris Millington, an analyst at Numis, said: “Redrow’s full year results are marginally ahead of Numis” estimates and we are leaving our forecasts for 2017 unchanged.
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In its annual results Redrow (LSE: RDW.L – news) blamed a slowdown in London activity on Stamp Duty rises, which were largely created to deter buy-to-let landlords buying-up properties.
