- Housebuilder said it was braced for the possibility of higher inflation
Berkeley Group has warned war in the Middle East could lead to a ‘deterioration’ in housing market conditions.
The housebuilder, which focuses on London and the south east of England, said it was braced for the possibility of higher inflation in the near term and for interest rates to remain higher for longer.
It said it would ‘await to see’ the impact of the conflict on the market, adding it was aware of the risk of a ‘further deterioration in macro conditions’.
Inflation could rise in part due to energy bills, which might go up because of disruption in oil and gas supplies. This could also lead to increases in the cost of producing food and other essentials, which would be passed on to customers.
The typical two-year fixed rate mortgage has gone above 5 per cent for the first time since last summer, as lenders re-price higher in the wake of the Iran conflict.
Banks are responding to expectations of fewer interest rates cuts by the Bank of England, or perhaps even rates rises, due to the increased risk of inflation.
Berkeley Group has warned war in the Middle East was ‘weighing heavily on risk sentiment’
Berkeley reaffirmed its annual profit guidance, but said trading had remained ‘constrained’ from 1 November 2025 to 28 February 2026 by the impact on consumer confidence of geo-political events and macro-economic uncertainty.
Berkeley shares fell 2.82 per cent or 106.00p to 3,650.00p on Friday morning.
Chris Beauchamp, chief market analyst UK at IG, said: ‘Berkeley has become the latest firm to see its shares fall after a good set of results.
‘Investors are more worried by rising oil prices and higher energy costs than anything else, and along with today’s poor GDP figures there is scant reason to be optimistic about the UK economy.
‘Consumer budgets are likely to be squeezed hard in coming months, slowing activity in the housing market dramatically.’
Berkeley optimistic on London property
The housebuilder reiterated its positive sentiment on the property market in the capital, saying price falls in recent months represented an opportunity for buyers.
‘In the long term, the outlook for London is positive’, it said, adding that the ‘current market dislocation presents a good opportunity to buy.’
The group expects its annual pre-tax profit to come in at £450million for the 12 months to April, and a similar level for fiscal 2027. It is targeting a net cash position of around £300million.
Berkeley added: ‘Looking beyond 2027, given the macro conditions, market sentiment and the regulatory delays being experienced, Berkeley will focus on cash generation to maintain a strong balance sheet, the quality of profit in the core business and shareholder returns, while optimising our land holdings and delivering our build-to-rent strategy.’
Sales enquiries have held up, the group said, with the value of underlying reservations recovering toward levels seen before the pre-Budget period last autumn.
Since its interim results, Berkeley said it had returned £59million via share buy-backs to investors, which takes the total for the year to £191million.
Richard Hunter, head of markets at Interactive Investor, said: ‘For the moment, Berkeley finds itself wading through treacle given guarded consumer confidence and the possibility of higher for longer interest rates keeping some potential new buyers on the sidelines.
‘Even though the revitalised planning system is in train, it will take some time to bed in. Berkeley noted a good level of sales enquiries, with underlying reservations edging back towards the pre-Budget lull.’
He added: ‘The overarching concerns have fed through to a share price which has eked out a gain of 4 per cent over the last year, as compared to a rise of 21 per cent for the wider FTSE 100, although the price remains down by 19 per cent over the last two years.
‘Of course, this is a highly cyclical sector and if nothing else, the perennial undersupply of homes in the UK will provide future opportunities.
‘For now, the market consensus of the shares as a hold is reflective that for investors, the wait has been too long and there are potentially more attractive opportunities elsewhere in the sector.’
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