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UK’s Berkeley forecasts 20% drop in house sales as interest rates rises weigh

UK’s Berkeley forecasts 20% drop in house sales as interest rates rises weigh

By Suban Abdulla and Aby Jose Koilparambil

(Reuters) -British high-end housebuilder Berkeley on Wednesday forecast a 20% drop in sales for the fiscal year that began on May 1, as demand suffers from rising interest rates and tough trading conditions due to inflation. The expected fall would come on top of a 15% decrease in forward sales already recorded in the last fiscal year, the FTSE 100 group said.

“The outlook is going to be choppy for a while until interest rates settle, which brings confidence back into the market,” CEO Robert Perrins told Reuters.

The housebuilder said demand was weighted towards homes closer to delivery, and in the current market, transactions typically stem from owner occupiers who are looking to move or investors with immediately available funds. Shares in the housebuilder fell as much as 3.4% to a near six-month low of 3,780 pence, while the UK housebuilders’ index dropped 2.6% on worse-than-anticipated May inflation figures. British’s consumer price inflation was unchanged in May at 8.7%, higher than economists’ expectations of a drop to 8.4%, and the BoE is widely expected to raise interest rates for the 13th meeting in a row on Thursday to 4.75%. Stubbornly high inflation meant major British lenders including HSBC, Nationwide and Halifax have repriced mortgage offerings in recent weeks. Britain’s finance minister Jeremy Hunt said he will meet with mortgage lenders this week to discuss how they can help homeowners hit by rising mortgage costs. Berkeley, which unlike its bigger rivals focuses on redeveloping land that was previously used for industrial purposes, also said it will remain cautious about new investment and sales launches due to volatility in the macro-economic, political and regulatory environments. Analysts at UBS said the regulatory and planning uncertainties were putting pressure on future home deliveries and exacerbating housing supply shortages, especially in London. Berkeley reaffirmed profit guidance of 1.05 billion pounds ($1.34 billion) for fiscal years 2024 and 2025. Operating across London, Birmingham and the South of England, Berkeley reported a 10% rise in pre-tax profit for the year that ended April 30 at 604 million pounds, compared with its forecast of about 600 million pounds.

($1 = 0.7855 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru and Suban Abdulla in London; Editing by Sherry Jacob-Phillips, Sohini Goswami, Peter Graff)


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