Boss of London’s biggest home builder tips longer lull but no house price fall

Berkeley Homes CEO Rob Perrins  (Berkeley Homes)
Berkeley Homes CEO Rob Perrins (Berkeley Homes)

London’s house market will be subdued for “longer than people think” the chief executive of the capital’s biggest home builder, Berkley Group, said today, but prices will not tumble.

Rob Perrins told The Standard that “prices are firm and I think they’ll remain firm”. He was speaking as the company, which builds around 10% of London’s new homes, revealed the impact of market turmoil after the Truss government’s short-lived mini-Budget.

In the five weeks after the measures, the value of sales reserved by buyers fell by a quarter. That was more resilient than wider industry declines, which were typically between 40% and 50%, helped by Berkeley’s focus on London. The capital’s buyers often have bigger deposits and could cope better when lenders pulled fixed-rate deals after the mini-Budget.

Perrins pointed out that the interest rate on two-year fixed-rate mortgage rates was not yet under the key level of 5%, below which “it is better to buy than rent,” he said. “The other thing we need to restore is the availability of 95% mortgages.”

He expects “low transaction levels, potentially for two to three years, longer than people think. But I don’t see a pricing issue, partly because of full employment, partly because of under supply.”

Berkeley develops brownfield sites for private sale across the capital and builds affordable homes for housing associations. A change in its sales mix in the period meant its average selling price fell to £560,000 from £647,000.

Over the half-year trading period, the FTSE 100 company sold over 2,000 homes in London and the south east, generating revenue of £1.2 billion, down by almost 2% and profit of £285 million, down 2%. It stood by earnings guidance of £600 million for the full year.

Richard Hunter, head of markets at Interactive Investor, said: “Berkeley is battening down the hatches in view of a tightening economic environment, but remains supported by its exposure to London and the South East.”

Berkeley’s shares ticked up 13p to 3811p on Friday, a rise of 0.3%, trimming their fall over the year to under 20%.