Berkeley warns of weak housing demand ahead of UK budget, urges urgent tax reform

Berkeley Group, a London-focused housing developer, has expressed concern over weak buyer sentiment ahead of the UK government's October budget. The company has urged for immediate tax and regulatory reforms to boost demand and construction in the housing market. Prolonged conflict in the Middle East and political uncertainty in the UK have further dampened sentiment and core economic indicators since the beginning of Berkeley's financial year.

Despite this, the company remains on track to meet its four-year £1.4 billion pre-tax profit plan, with profits expected to be broadly even over the period. However, some buyers may postpone transactions until after the budget and any election uncertainty subsides. Berkeley called for the government to reform stamp duty, arguing that the current tax regime, which was introduced when interest rates were near zero, has become a binding constraint on transactions as rates have normalized.

The company suggested capping the levy at 1% for first-time buyers and downsizers, and eliminating the 5% surcharge on investors. Berkeley believes these changes would stimulate transaction volumes and housing delivery, including affordable homes. In the first four months of the year, Berkeley returned £60 million to shareholders by buying back 1.7 million shares at an average price of £34.18.

The company has already surpassed its target of £640 million in shareholder returns by September 2030, returning funds at a faster pace than required. Net cash is expected to be around £250 million at the half-year mark. Analysts from Goldman Sachs commented that this announcement is unlikely to significantly impact Berkeley's shares, as the company reaffirmed its medium-term guidance.