Demand slumps following ‘extraordinary attack on bu...

One of Britain’s largest housebuilders has warned of a sharp decline in demand caused by Brexit uncertainty and the government’s outright assault on buy-to-let landlords

Berkeley Group said reservations were down 20% in the six months to the end of October, largely due to “heightened global macro-economic and political uncertainty”, according to the company’s chief executive Rob Perrins.

Perrins said that the sharp drop in reservations was ultimately due to “higher stamp duty” and the “extraordinary attack on buy-to-let landlords”, which plays an important part of sustaining the housing market, particularly in London, not to mention increasing the supply of new homes.

So far this year, buy-to-let landlords have been hit by more stringent mortgage lending conditions, the 3% stamp duty surcharge that was introduced in April, while the 10% Wear and Tear tax relief for landlords who rent out furnished homes has been abolished, leaving them free to only claim for the amount that they have spent. What’s more, mortgage tax relief is set to be phased out from April 2017.

Shares in Berkeley have dropped by more than a fifth since the introduction of the stamp duty surcharge in April for those acquiring additional homes, including buy-to-let properties, along with EU vote in June, as housebuilding stocks are hit by uncertainty.

But despite the significant decline in demand, Berkeley has reported a 34% rise in pre-tax profit to £393m for the first half and said it was well positioned to weather the uncertainty.

It sold 2,076 homes, little changed on the same period last year, at an average selling price of £655,000, which was up 29%.

Bank of England figures last week suggested the UK housing market was recovering from a post-referendum lull after mortgage approvals rose to their highest level since March.

Separate data from Nationwide revealed last month that home prices continued to rise, albeit at the weakest annual rate since January.

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John McKay
06 December 2016 08:19 AM

You are missing a couple of huge points. Firstly there is enormous demand for rental stock which is increasing due to net immigration figures, or have you not seen the recent stats? A decline in the rental stock available will force up rents - simple supply and demand economics.

Secondly, builders will build houses for whomever wants to buy them so what you are saying is just plain silly. The issue for this builder is that landlords will buy houses off-plan or early in the build. That deposit money gives the builder the cashflow he needs to continue, again simple economics. If a FTB wants to put down that deposit money the builder will be very happy to take it, but they don't. Hence there will be less demand and a slow down of output and that exacerbates the housing crisis, putting upward pressure on house prices and makes it even harder for the FTB to get on the ladder. When will you understand this?

John McKay
06 December 2016 08:23 AM

It's an average price they're quoting Paul, and as you rightly point out that is high for BTL. So perhaps the fact that landlords are withdrawing is actually helping push the average price up for this developer. If the lower end demand has decreased then perhaps they are also concentrating on higher end developments and that has given the rise in profits. There's not really enough info in the article to draw reliable conclusions.