Shares in Berkeley Group fell five per cent after the housebuilder announced it has no plans to increase its production of homes.
The FTSE 100 firm cited economic uncertainty, a decline in buy to let investment and increased planning red tape as the reason why in its latest trading update for the period from November 1 to February 28.
The group said that market conditions in London and the South East, its core market, were unchanged from the first half, when it said market fundamentals remain ‘compelling’.
Production halt: Shares in Berkeley fell five per cent after the housebuilder announced it has no plans to increase its production of homes
However, it added that high transaction costs, the 4.5 times income multiple limit on mortgage borrowing and ‘prevailing economic uncertainty’ all mean Berkeley is ‘unable to increase production beyond the business plan levels’.
Berkeley said in a statement: ‘The fundamentals of the market in London and the South East remain compelling, but the operating environment and its impact on transaction volumes, whilst sufficient for the business plan and five year profit guidance … do not support the step-up in Berkeley’s production levels that these markets so badly need.
‘The operating environment and its impact on transaction volumes, whilst sufficient for the business plan and five-year profit guidance period that ends at April 30, 2021, do not support the step-up in Berkeley’s production levels that these markets so badly need.’
The housebuilder also pointed to a fall in domestic buy-to-let investors, who have been hammered by increases to stamp duty, and the ‘time and complexity of getting on site following planning approval’.
It comes at a time when the Government is attempting to increase the rate of housebuilding in an effort to ease the housing crisis.
Housing crisis: Berkeley’s announcement comes at a time when the Government is attempting to increase the rate of housebuilding in an effort to ease the housing crisis
Berkeley still expects forward sales above £2billion this year and the group reaffirmed its guidance to return pre-tax profits of least £3.3bn for the five years to April 2021.
The group has previously warned over political uncertainty, including Brexit, hanging over the property market.
Berkeley had previously revealed that pre-tax profits had soared 36 per cent to £533million in the six months to October 31, driven by strong demand in the South East.
Revenues meanwhile climbed 14 per cent to £1.6billion. The firm also sold 2,117 homes, marginally more than last year but at a much higher average selling price of £719,000 compared to £655,000 in 2016. Berkley’s shares dropped 4.89 per cent to 3,731p in morning trading.