As London housing market wanes, housebuilder Berkeley enjoys ‘peak profit’

Company warns of uncertainty in the future, but boasts peak profit.

Article updated: 20 June 2018 9:00am Author: Graham Spooner

London-focused up-market housebuilder Berkeley Group announced a strong set of final results this morning but acknowledged the slowdown in the capital’s property market and the ambiguous year ahead.

As a result of its position and highly regarded management, followers of the sector are always keen to hear its views on the housing market, an area that of course along with the weather features high on the topic list of the majority of us Brits.

Berkeley highlight that although there has been an increase in supply across England in London the picture is different with some areas of development 30% lower than two years ago. As a result of mounting caution over Brexit, political uncertainty and regulation, the market in London and South East has remained subdued.

Pre-tax profit came in at £934.9 million for the year, a 15% increase from the year previous, representing a “peak for Berkeley” which was slightly ahead of market expectations. Owing to its lift in profit, the group has increased its five-year profit guidance. The group reported 3,536 house completions which were down on previous year while the average selling price rose to £715,000 from £675,000 the year before.

Berkeley also stated that profits for the next financial year will likely return to more “normal levels” and be around 30% lower. Moreover, due to its cautious short-to-medium term outlook, the shares responded negatively reducing 4% in early morning trading although up around 70% from the week following the Brexit decision.

Given the level of uncertainty in the sector and increasing worries that the top of the housing cycle may not be far away, we can at best recommended Berkeley Group as a Hold for investors willing to accept a medium level of risk.


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Graham Spooner portrait photo
Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FSA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.