The price of homes sold by Berkeley Group increased by close to £100,000 last year, as the London developer shrugged off concerns that there would be lasting damage to the capital from coronavirus.
The high-end housebuilder said it remained “committed to London” even though the pandemic had prompted many home movers to look outside the capital.
“We firmly believe that this does not represent a permanent structural shift that has the capacity to reverse urbanisation,” said chief executive Rob Perrins, as the company published results for the year to April 30 2021.
Berkeley’s pre-tax profit for the year was £518m, up 3 per cent from the previous year. The company’s revenue increased 15 per cent to £2.2bn as the average selling price of one of its homes increased to £770,000 during the year, up from £677,000.
Perrins acknowledged the impact Covid has had on the city — not least in forcing the international buyers and investors on which Berkeley relies for a significant number of sales to stay away. The value of homes reserved for sale this year was 20 per cent lower than the previous financial year, said the company.
But the chief executive predicted that house prices and sales would ultimately remain buoyant due to a chronic undersupply of homes in London. The number of buyers making inquiries, the first step towards a potential sale, had increased in recent months and was now above pre-pandemic levels, according to Berkeley.
One issue that might slow investment was a planned increase in corporation tax and the introduction of a separate levy on developers to help cover the costs of addressing the building safety crisis, said Perrins.
“We need certainty going forward. If you keep increasing taxes, you won’t be able to make a return on investing,” he said. Combined with the cost of meeting increasingly stringent environmental targets, new taxes could shave as much as £150m from annual pre-tax profits, equivalent to about 30 per cent of this year’s total, he added.
Berkeley’s opposition to tax hikes was likely to go unheeded, said Clyde Lewis, an analyst at Peel Hunt. “I don’t think Rishi Sunak will listen to what Berkeley Group thinks quite frankly.”
“The bigger issue for Berkeley in London is the mayor [Sadiq Khan],” he added. Khan has introduced stricter affordable housing targets for developers to meet, reducing the potential margin on sites in the capital.
But Berkeley still believes there is opportunity in the housing-constrained London market. The company acquired 10 new development sites in the year, the bulk of them in the capital.
Shares in the company fell about 1 per cent to 4,588 pence on Wednesday morning.