Berkeley boosts profit despite drop in sales reservations

Berkeley Group has posted a 9.5% increase in its annual pre-tax profit.

The brownfield regeneration specialist, in its results for the year to 30 March, today reported pre-tax profit of £604m, up from £552m the previous year. 

The group said it had met its profit expectation for the year, and said it is also on track to hit more than £1bn of pre-tax profit over the next two years. Its turnover increased 8.6% to £2.5bn.

The increase in profit comes despite a 15% drop in underlying private sales reservations, which it said was due to the market weakening following the sharp rise in interest rates in the aftermath of the mini-Budget last September.

It said: “Berkeley will continue to be cautious on new investment and sales launches given the volatile operating environment, which includes the current macro-economic, political and regulatory environments.”

It said it expects current sales rates to be around 20% lower in 2023/24 than in 2022/23 and added: “In this type of market there is a lack of urgency and transactions typically stem from owner occupiers with a current motivation to move or investors with immediately available funds, with demand therefore weighted to product which is closer to delivery, as opposed to off-plan sales that do not complete for two to four years. On this basis, at current sales rates, sales for 2023/24 will be around 20% lower than 2022/23.”

Berkeley said it completed 4,043 homes in the year, up from 3,760 the previous year.

>>See also: How to get the green light for brownfield

But it warned that supply in the south east will “inevitably” reduce in an “increasingly complex, uncertain and slow planning system, at a time of high build costs, increased regulation and higher corporation tax, alongside the Residential Property Developer Tax and proposed new Building Safety Levy”.

And it added that it was putting the brakes on its modular housing production at its factory in Kent. It said: “Noting the decision of other parties to exit the industry due to the costs and efficiency impact of regulatory and planning uncertainty on a stable production pipeline, Berkeley’s immediate focus is on evolving the product to remove cost, weight and complexity whilst continuing to work with the numerous statutory bodies to achieve the various regulatory approvals required for efficient future delivery. We will not be putting the factory into full production until this is achieved.”

Berkeley also said that the government’s proposed changes to national planning policy would “weaken the presumption in favour of sustainable development and the status of five-year land supply targets will materially reduce the pace of delivery of new homes”.

It said the planning system has yet to recognise the challenges of brownfield first development in the regulatory environment. Berkley has plans for 32 regeneration schemes, with work on 26 underway.