Berkeley warns of London housing slowdown in call for ‘political leadership’ from Burnham
Berkeley has called for “strong political leadership” on housebuilding from potential Prime Minister Andy Burnham as it warned that London is on course to miss its housing targets.
The capital’s biggest housebuilder issued a swathe of demands to policymakers, warning that there is “no prospect of material improvement” on housebuilding “without more decisive intervention” from government.
The FTSE 250 firm warned that London is delivering less than 10 per cent of its annual government-set housebuilding target.
It now takes eight years to complete an apartment building in the capital, the firm said, compared to five a decade ago.
Rob Perrins, the housebuilder’s executive chair, praised the Labour government’s “excellent job in restoring the fundamentals of housing policy, which had been abandoned by its predecessor”.
But he warned that policymakers must go further, urging the government to slash stamp duty for new homes to three per cent, and to zero for first-time buyers.
Stamp duty surcharges on second homes should also be scrapped because they “deter vital investment in new build homes,” Berkeley said.
Burnham eyes social housing shake-up
The housebuilder also said that City Hall’s Homes for London plan, an emergency package designed to accelerate delivery in the capital, should be implemented immediately and remain in place until London meets housebuilding targets.
“The excessive tax burden, that was introduced in a different economic paradigm, must be reduced to unlock demand and attract the essential investment without which regeneration schemes cannot proceed,” Perrins added.
The housebuilder claimed that, if implemented, these demands will mean that London will meet its housebuilding target, tax revenues will jump and GDP will grow by one per cent.
Berkeley’s intervention comes days after Sir Keir Starmer resigned as Prime Minister, with outgoing Mayor of Greater Manchester Andy Burnham poised to take the keys to Number 10.
Burnham is expected to launch a shake-up of housebuilding policy in a bid to boost social housing. Analysts at Panmure Liberum warned on Tuesday that a possible redrawing of the Affordable Homes grant programme could delay payments and “push back the delivery of social and affordable housing units”.
“However, during his time as Mayor of Manchester, Burnham has shown to be a pragmatist, and we suspect he would be reluctant to quickly impose measures that would disrupt the delivery of initial funds,” the analysts added.
Perrins told CityAM that he is optimistic that the new Makerfield MP would back rapid investment in housebuilding if succeeded Starmer. “That’s what Manchesterism is, really. The town centres begin to thrive, they stop being hollowed out, and you get people moving into the cities.”
Burnham has reportedly considered replacing council tax and stamp duty with a new land value tax, but the housebuilding boss urged Burnham to hold off on radical reform until the next election.
“What he has to do, in my view, is bite the bullet and reduce the stamp duty taxation to get wider growth on new build homes,” Perrins said.
Profit and revenue fall
Berkeley saw profit before tax fall by 15 per cent to £451m in the year to April, as forward sales dipped by 28 per cent year on year to £1m.
The firm’s revenue slipped by four per cent to £2.4bn, though it remained above analyst expectations, and earnings per share fell by 11 per cent to 332p, marginally undershooting forecasts.
In April, the firm’s shares dropped by 17 per cent in one day after it announced it will stop buying land to insulate itself against an “unprecedented increase in cost and regulation”.
Berkeley stood by this decision when announcing its full-year numbers, saying that it cannot make sufficient returns on land investment due to the “continuous increase in the tax and regulatory burden on residential development”.
In May, the housebuilder said it can “no longer invest” in London after its plans to build 867 homes on the site of a Peckham shopping centre were blocked by a planning inspector.
Perrins said on Wednesday that the knock-on effects of the Iran war scuppered the “optimism” felt by the construction industry at the start of this year, and returned the property market “to being characterised by caution and lacking in urgency”.
The housebuilder, which focuses on regenerating brownfield land, said that London’s outlook “remains hugely compelling” despite “the most challenging of conditions”.
Berkeley’s shares rose five per cent on Wednesday’s early trading, to 3,628p, leaving the stock down eight per cent in the year so far.