In the London focus group, the developer of Berkeley announced record annual profits of almost 1 billion pounds, but warned profitswere likely to decline next year by about a third, the uncertainty of the quarter and month weighs on the capital’s housing market.
The company, which builds luxury homes in London and the South East, said 15% jump in profit before tax to £934.9 m in the year to 30 April could be the peak, as the market remained at the same level.
Profit rose last year despite falling sales, due to the increase in average sale price of a home in Berkeley, up to £715,000 from £675,000 in the prior year. This is more than three times the national average of about $ 214,000, according to the nationwide building society.
Berkeley sold 3,536 homes for the year, 369 less than a year earlier. Its shares fell to $ 39.26 on Wednesday 5% After it said that profit growth may not be sustainable because higher taxes on second homes, the uncertainty of the British exit from the EU and stricter mortgage rules weighed on the mood of the buyer.
“These findings … represent the peak for Berkeley with margins returning to more normal levels from 2018-19, when profits are expected to be approximately 30% lower,” the company said.
Berkeley said that he was able to buy land in the best locations in 2010-13, when he was in cash-rich Position compared to other companies. However, the good that is coming to an end.
Scheme of the company includes lines of Kensington in West London, where flats cost £ 1.6 m to £3.4 million, and the Royal Arsenal riverside development in Woulidge, South East London, where flats range from £320,000 to £ 1.7 m.
Every year, housing prices in London last year fell for the first time since 2009, as weak wage growth and leaving the UK uncertainty deterred potential buyers.
Tony Pidgley, founder and Chairman of Berkeley, said that London was still a good place to buy a home. “It is significant that some sponsors and builders choose to exit the market when faced with risk and regulation of which today is opposed to the development in the capital, where the macro and political uncertainty, including the British exit from the EU, not leading to it cautiously,” he said.
“It is a great shame, as London is a fantastic world-class city with unique attributes that will last long after the current break, which only exacerbates the documented under-nutrition.”
Last year, Pidgley was awarded a total pay package of £29M, after a sharp rise in stock prices raised the value of the consideration received under long-term incentive plan. However, Berkeley said the following cap on payments meant Pidgley maximum potential for the year to 30 April 2018 will be 8.2 m.
Berkeley said that he was expecting to get at least £3.4 bn between may 2016 and 2021, revised from the previously manual.
Pidgley said the company is taking steps to address the difficult London market, including to be more cautious on investment and growing business in Birmingham via St. Joseph, the newest brand Builder. About 75% of the sites Berkeley inside the M25.
George salmon, stock analyst at hargreaves lansdown, said, “Berkeley can be delivered higher than expected profit this year, but it seems that investors are more worried about stability in the wider London market.
“Punitive stamp duties reduce the activity, while the impending British exit from the EU brings even more uncertainty. Potential buyers are increasingly sitting on the sidelines waiting for more clarity about what process the British exit from the EU would look like, while on the supply side, there are questions about whether enough labor to build the homes we need”.