Berkeley Group has warned that the war in the Middle East could cause a ‘further deterioration’ in housing market conditions by pushing up inflation and interest rates.
The FTSE 100 housebuilder became the latest in the sector to sound the alarm, echoing concerns voiced by rivals Vistry and Persimmon in recent days.
Mortgage lenders withdrew 530 deals this week as market turmoil caused by the war wiped out interest rate cut hopes.
Figures from Moneyfacts showed that the average two-year fixed deal has climbed from 4.87 per cent on Monday to 5.1 per cent yesterday, the highest since last July.
Setback: Chancellor Rachel Reeves hopes to build a growth rebound this year
For five-year deals it has risen from 4.98 per cent to 5.19 per cent, the highest since last April.
Berkeley’s trading update is a fresh blow to Chancellor Rachel Reeves’ hopes of delivering a growth rebound this year, as well as Labour’s target to build 1.5m homes in this Parliament – already seen as highly unlikely to be delivered.
Separately, Office for National Statistics figures showed that the beleaguered construction sector grew by 0.2 per cent in January after three months of decline, but remains in the doldrums and smaller than it was last year.
Berkeley reaffirmed its annual profit guidance of £450m, even though trading over the four months to the end of February was ‘constrained by the impact on consumer confidence of geopolitical events and macroeconomic uncertainty’.
Despite that, the London and south-east focused group said that sales enquiries were ‘good’ and the value of reservations has been recovering towards levels seen last summer – before pre-Budget fears created a ‘hiatus’.
Berkeley added: ‘The emerging situation in the Middle East is weighing heavily on risk sentiment and we await to see the impact of this on the market.’
Analysts have also pointed to the impact of higher prices of building materials such as bricks – and warn that these costs may be harder to pass on, with buyers constrained by higher rates.
Taylor Wimpey and Vistry have warned that profit margins will remain subdued this year. At the centre of the new challenge facing builders is the surge in energy costs as oil and gas supplies from the Middle East are choked off. That is both pushing up prices of the materials they use and threatening to stoke wider inflation, making it less likely that the Bank of England will cut interest rates this year. Changes to rate expectations are making the cost of home loans more expensive.
Adam French at Moneyfacts said: ‘Even the very cheapest deals are shooting higher.’
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