Berkeley to cut back on development sites as costs bite

Berkeley will reduce the number of sites it holds for development in the face of rising costs and planning constraints, it has said.

The housebuilder, in its interim results for the six months to 31 October, said it will focus in the short-term delivering homes on its existing sites. It owns 84 sites covering 64,121 plots.

It said the number of homes built by the market will “inevitably” fall in London and the South East, given the pressures created by additional costs and charges, a slow planning environment, the weak market and high build costs.

It said the current operating environment was “characterised by record levels of planning tariff within an increasingly complex and slow planning system”, alongside “high build costs, increased regulation and higher corporation tax, […] the Residential Property Developer Tax and proposed new Building Safety Levy”. Together, it said these pressures “will inevitably continue to see a reduction in supply of new homes in London and the South east.

“Berkeley’s delivery of new homes will therefore result in a reduction in its land holdings.”

The housebuilder reported a 2% drop in pre-tax profit compared to the same period last year to £284.8m and a 1.6% drop in turnover to £1.2bn. It said the value of underlying sales fell in the five weeks following the end of September to 25% lower than the previous five months.

Despite this, Berkeley said it still expects to deliver profit of around £600m in the full-year in line with previous forecasts. It said this is due to forward sales at the start of the financial year and sales rates ahead of the previous year. It built 2,080 homes in the half-year, up from 1,828 last year.

Berkeley also raised concerns about Michael Gove’s proposed planning reforms announced this week. Gove is proposing to remove the requirement to maintain a rolling five-year supply of land for housing for councils that have a local plan in place. This reform would mean the presumption in favour of sustainable development will apply less frequently.

>> See also: Berkeley wins major green belt appeal

>> See also: Warning of ‘complete collapse’ in local plan-making after Gove reform announcement

Berkeley said: “We are concerned that any weakening of the presumption in favour of sustainable development and the status of five year land supply targets will reduce the pace of delivery of new homes.

“This will create uncertainty, less predictability of outcome and less stability, which will lead to lower investment going forward.”

Berkeley also said it is in discussions with the Department of Levelling Up, Housing and Communities over the wording of the contracts which will give force to the developer pledge, under which housebuilders pay for remediation work on their own buildings.

It said: “It is in the interests of all stakeholders, including leaseholders, local and national government, banks and developers that the long form contract follows the principles of the pledge and has both a clear standard against which buildings can be assessed for life-critical fire safety issues, and an independent dispute resolution process.”