This analyst insists falling house prices at London luxury housebuilding hotspot Nine Elms are nothing to worry about
Berkeley Group is one of the UK's largest and most dependable housebuilders – and its founder, CityAM personality of the year award winner Tony Pidgley, achieved near-mythical status after he famously (and correctly) called the top of the market during the downturn.
But there's one problem: the company's shares have fallen almost 20 per cent this year, after some expressed concerns that the company is over-exposed to Nine Elms, the London luxury housebuilding hotspot where prices have reportedly fallen in recent months.
Today, though, Jefferies very publicly lent its support to Berkeley Group – adding that falling prices at Nine Elms are just a product of over-enthusiastic pricing.
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"Asking prices have been falling in Nine Elms, which does not surprise us given properties appear to be initially marketed at more than £1,500 per sq ft, when recent sales averaged £1,183.
"However, even given this pricing optimism, Nine Elms has been outperforming the rest of England. Of the properties currently marketed in Zoopla, 25 per cent of those in Nine Elms have seen a price reduction compared to 27 per cent across England.
"The distribution of price reductions is similar (with a slightly higher percentage of large reductions (those >20 per cent) across England than across Nine Elms."
They also had encouraging things to say about Berkeley Group itself.
"Having walked the streets, secretly shopped, analysed re-sale prices and investigated asking prices, we continue to give Berkeley Group a clean bill of health," they said.
"Our analysis of secondary market sales at [Berkeley Group's Nine Elms scheme] Riverlight since 2014 shows a healthy average uplift of 30 per cent with average price per sq ft rising from £907 to £1,183."
Projects at Nine Elms – including Battersea Power Station – have come under pressure in recent months, after CityAM reported the cost of some luxury homes were being slashed.
Last week it emerged a contractor working with Dalian Wanda, the company behind another of the area's massive residential schemes, had walked away from a £1bn contract.
Berkeley Group shares were up 0.5 per cent, at 2,861.9p in mid-morning trading.