Berkeley Group has issued a trading update today, covering the four months to the end of August.
During this period, the group saw private reservation sales fall by up to 35%.
In addition, Berkeley Group maintained its predicted pre-tax profit of £1.05bn, while it is expected to keep net cash at £325m at the end of October.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Berkeley issued a trading update covering the four months to the end of August, and we’ve seen a similar story across the rest of the housebuilders this earnings season.
“It looks like the recent interest rate hikes pushing up mortgage costs are causing a relative lack of urgency among new buyers as private sales reservations dropped 35%.
“Pricing has remained resilient though, due to the constrained supply of new-build and second-hand homes, giving Berkeley the confidence to reiterate its guidance for £1.05bn of pre-tax profits across the coming two financial years, weighted slightly towards the current year. That represents declines of around 10% in consecutive years.”
She continued: “In the meantime, Berkeley’s taking action to protect its financial resilience by carefully matching its supply with demand and completely stopping spending on new plots of land.
“That’s expected to keep net cash at £325m by the end of October, down around 20% since April but should be enough to help cushion the impact of lower sales in the near term.
“Looking bigger picture, Berkeley’s London focus offers something different to peers, and demand in the capital’s likely to remain more robust than other areas of the country.
“Add to the mix that the UK housing market’s suffering from a fundamental supply shortage, and the long-term picture doesn’t look so bleak. But in the short term, there’s plenty of stormy clouds for Berkeley to weather.”
Richard Hunter, head of markets at Interactive Investor, added: “Berkeley Group continues to fine-tune its operations against a notoriously difficult backdrop for the sector.
“In some ways, Berkeley is a different beast to many of its competitors, with a potential edge coming from its mix of an exposure to London and the South East, higher-end properties and the regeneration of brownfield sites in which it is well accomplished.
“The group has also reined back its land acquisition, making no purchases in this period and with the intention of only investing very selectively in new opportunities.
“Berkeley is far from being immune to the wider issues of mortgage availability and affordability, planning bottlenecks, uncertain consumer propensity to buy and a cloudy outlook.
“Even so, the shares have performed well in relative terms to many of its peers although the undemanding valuation suggests some concern on the horizon.
“Over the last year the shares have added 14%, as compared to a gain of 2.5% for the wider FTSE100, although over the last two years the price remains down by 15%.
“Investor sentiment has not yet turned the corner, although the market consensus of the shares as a strong hold demonstrates some degree of comfort.”
