The U.K.’s largest homebuilder by market value, Berkeley Group Holdings Plc (BKG)reported a 58 per cent rise in full-year profit and a 40 per cent increase in the number of sold houses. Benefitting from the resilience of the London property market, the group’s profits soared to £214.8 million in the year ended April 30, up from £136.2 million a year earlier. According to Berkeley’s statement, home sales rose to 3,565 from 2,544 a year earlier, while the average selling price increased three per cent to £280,000.
Berkeley, which has so far outperformed rival homebuilders by focusing on more expensive properties in central London, has snapped up key sites throughout the capital. Amongst the biggest deals made during the last fiscal year is the £150 million purchase of the former News International headquarters in Wapping, the former home to the Sun, the Times, the Sunday Times and News of the World. According to the homebuilder, demand in London and south-east England is expected to remain strong, echoing other real estate developers that are also underpinning their growth on the two areas in 2012.
And while the residential property market in London and south-east England, which Berkeley has benefited from, has remained robust, conditions in the rest of the country remain challenging, largely due to tight mortgage financing amid a tough economic environment. “London’s a very stable market, it has very consistent demand for sales,” Berkeley Group Managing Director Rob Perrins said. “It has a much better feel-good factor compared to the rest of the (UK) economy,” he added.
!m(/uploads/story/109/thumbs/pic1_inline.png)But despite the overall challenging economic outlook in the UK, new housing is “uniquely placed” to deliver growth, said Berkeley’s founder and chairman, Tony Pidgley. “It is a sector that delivers employment both during and after the development process and stimulates activity throughout the supply chain in manufacturing and service industries,” he said. His statement has been accompanied by the announcement that the residential property developer is well-positioned to meet its previous target of doubling its pre-tax profit from £110 million to £220 million by the end of fiscal 2013, two years earlier than planned. Berkeley’s first targeted dividend repayment is expected in September 2015.
Despite the good results and positive expectations, the real estate company took the opportunity to deliver a warning to the government about the danger of failing to invest in growth. Mr Pidgley said the decision to invest in further activity remained “finely balanced”. “Growth requires a stable political and economic environment with well-considered policies that welcome inward investment and give businesses the confidence to invest and grow; it is essential that London’s competitiveness on a world stage is preserved,” he said. Mr Ridgley also went on to warn that “unnecessary bureaucracy, over-zealous regulation and taxation policy” were all obstacles to investment and growth. The factors accounted for at least part of the stagnation in construction levels.