15 March 2024 , 09:40
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Property development company, the Berkeley Group, has reported that while house sales have continued to drop, the prospect of lower mortgage costs is sparking interest among potential buyers.
The company, which focuses on urban regeneration projects and high-end homes, has told investors it's set to report a pre-tax profit of £550 million for the latest financial year. However, they've also revealed that recent sales reservations are about a third lower than this time last year.
This comes as the housing market continues to struggle due to high mortgage rates and tight household budgets. Despite this, Berkeley remains optimistic, noting that enquiry levels are strong and customers are hopeful that political and economic uncertainty will lessen and interest rates will start to fall.
This offers hope for those waiting for signs that the economy is improving and mortgage costs could decrease later in the year. Current data from Moneyfacts shows the average two-year fixed residential mortgage is around 5.8%, having exceeded 6% last year.
Berkeley, which builds homes across London, Birmingham and the south of England, says it's in a "strong" position having secured all sales for the year ending in April, and over 70% of sales for the next financial year. They've also noted that build-cost inflation has stabilised across most trades.
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Aarin Chiekrie, an analyst for Hargreaves Lansdown, said: "Berkeley's sitting on solid ground, despite some wobbles in the wider housing market. Many of its peers have posted large revenue and profit declines in recent months."
"But Berkeley's London focus and higher-end product, with an average selling price of £624,000 at the last count, means it offers something different to other large builders. While markets aren't forecasting much of an uplift in the housing market in 2024, there are some early signs that pressures are beginning to ease for housebuilders."
"Mortgage rates have fallen from peak levels, real wages are growing and build-cost inflation has pulled back, giving some relief to industry margins."