Berkeley Group shares: investors book profits as house sales volumes fall

Berkeley Group shares dipped on Friday after the housebuilder said sales volumes had fallen in the six months to 31st October. Yet, the company produced higher profit before tax than in the same period a year ago.

The news encouraged investors to book profit in the FTSE 100 homebuilder after a 20% rally from October lows. Berkeley Group shares were down 2.1% to 4,836p at the time of writing.

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Berkeley said the ‘market lacks urgency’ and their sales rates were around a third lower in the half year compared to the prior financial year. The cash due for forward sales declined to £1,964m as of 31st October from £2,136m 30th April 2023.

Despite falling sales volumes, Berkeley Group’s profit before tax rose 4.6% to £298m in the period. The company said it had achieved £10m in operating cost savings and was starting to see build cost inflation stabilise.

Rising profit for a housebuilder is a rarity in 2023 and it will put Berkeley Group in good stead when interest rates are eventually cut and mortgage rates ease.

“Berkeley Group is sitting on some solid foundations, allowing it to weather the cyclical nature of the housing market,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

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“High mortgage costs are causing a relative lack of urgency amongst potential buyers, and that’s seen Berkeley’s sales rates fall in the first half, in line with wider trends across the sector.”

“But with Berkeley, there’s scope to outperform its peers on this front in the new year. Domestic and international demand in the key London market is likely to remain more robust than in other areas of the country, and the housing supply shortage doesn’t look to be going anywhere soon. The tight supply of homes on the market and the group’s higher-end product, with higher average selling prices of around £624,000, are helping to offset lower sales volumes.”

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