The high-end housebuilder Berkeley Group, which is set to drop out of the FTSE 100 this week, has launched an attack on government housing policy, saying increased taxes in the sector are a risk to London’s prosperity.
In a trading update, the group said changes to the stamp duty regime would prevent the capital from meeting its housebuilding targets.
“What is increasingly clear is that government policy, which has been helpful outside London, has had a negative effect on the capital,” Berkeley said.
“Transaction taxes are now too high and this is restricting both mobility in the second-hand market and the pace of supply and delivery of new homes in London and the south-east.”
Berkeley said reservations of its homes had been at least 20 per cent below 2015 levels during the year so far, due to the tax changes as well as June’s EU referendum.
But the group reiterated its profit guidance until 2018, saying it still expected to make £2bn of pre-tax profit by the end of April that year thanks to a strong pre-order book.
Redrow, meanwhile, a FTSE 250 housebuilder, predicted “another excellent year” in 2017 after clocking up its third straight set of record results in the 12 months to June 30.
Redrow proposed a 67 per cent increase in its full-year dividend to 10p a share after pre-tax profits improved by 23 per cent to a record £250m on revenue of £1.38bn, a fifth higher than the previous year. Profits came in higher than the £224.8m expected by analysts.
Redrow said it completed 17 per cent more home sales last year and also achieved a 7 per cent uplift in average selling prices to £288,600. The Flintshire-based company said it had entered the fresh financial year with a record private order book of £807m, up 54 per year-on-year.
Prices for homes in London’s wealthiest areas have been declining since the former Chancellor, George Osborne, overhauled stamp duty on homes in 2014; an additional surcharge on second homes introduced this year has further damped the market, according to agents.
Berkeley and Redrow both said the changes would have broader effects on the housing market across the capital, including the provision of affordable homes that developers are required to include in new schemes.
“While these challenges persist, and the barriers to entry for small builders remain high, London will fall well short of its targets for new homes,” Berkeley said.
Berkeley said it had taken a “selective” approach to land buying since the Brexit vote, acquiring just two sites. Its shares are still 18 per cent lower than their pre-referendum price.
The group said this week that it had halted work on a partially completed £20m development in Barnes, west London — a rare move, although people close to the company said this was to allow buyers to customise their apartments, rather than because of sales concerns.
The company will pay out a dividend of £1 a share on September 15 and said it still planned to pay out an additional £10 a share over the period to September 2021.
Redrow has sought to navigate softness in the top end of the London market — for large houses and luxury apartments in “prime” central London — by focusing on “mid-range” homes and “affordable” flats in the capital’s outer boroughs.
“We have made good progress working through our legacy of prime London apartments … and now have very little exposure to this sector of the market,” the company said.
