Housebuilder Berkeley improves its outlook for year despite 'challenging' conditions

Nevertheless, the group improved its guidance for the current financial year on the back of a “strong” order book.

Berkeley, which predominantly focuses on developments in London and southern England, said it expects a pre-tax profit of £525m for the current financial year, lifting its previous target by 5 per cent.

However, this will represent another decline in profit for the firm.

It came as the group posted a £557.3m pre-tax profit for the year to April, which itself was down 7.7 per cent on the previous year due to the sector slowdown.

The company said it has been impacted by interest rates remaining at high levels for longer than expected, but stressed there are “signs that the outlook is improving with inflation greatly reduced, the first interest rate cut expected later this year and a return to growth”.

Rob Perrins, chief executive of Berkeley, said: “This is a strong performance in a challenging and volatile operating environment, demonstrating the resilience of Berkeley’s business model with its focus on the country’s most undersupplied markets.

“We continue to see good levels of inquiry for well-located homes built to a high standard of design and quality but recognise that the current lack of urgency in the market is likely to remain until the long-anticipated reduction in interest rates commences.

“Berkeley continues to benefit from a strong order book and has already secured 80 per cent of its sales for next year, underpinning today’s 5 per cent increase in guidance.”

Shares in Berkeley were 2 per cent lower in early trading on Wednesday.

Richard Hunter, Head of Markets at interactive investor, commented: “Berkeley’s focus on the more upmarket end of the housing spectrum has proved to be something of a shield against what has been a difficult few years for housebuilders.

“The group reports that enquiry levels are good, as customers begin to renew their interest in anticipation of falling interest rates later in the year, and with mortgage availability improving given an increasingly competitive range of offers.

"There will still be vestiges of weakness which will take some time to wash through, such as sales rates, which are down by a third compared to the previous year.

“At the same time, the group is differentiated from a number of its competitors on a couple of fronts.

"The first is the group’s exposure to London and the South East, where an average selling price of £664,000 compares to £608,000 the previous year, leaving scope for margin improvements and profit.”

He added: “Berkeley has navigated the last few years carefully although the full results of its labours are perhaps yet fully to wash through.”