Cut stamp duty to revitalise the new-build housing market, says Berkeley boss as profits
Berkeley Group has called for stamp duty to be slashed for home buyers in order to give a shot in the arm to the flagging new-build housing market.
Reporting a fall in profits in its annual results, London’s biggest housebuilder warned that there was ‘no prospect of material improvement’ in the number of homes being built ‘without more decisive intervention’ by the Government.
Executive chairman Rob Perrins said: ‘Demand for and supply of new homes has been hit by over ten years of continual stamp duty land tax increases and new surcharges.
‘SDLT should be reduced on all new homes to a maximum of 3 per cent, zero for first-time-buyers, and the SDLT surcharges that deter vital investment in new-build homes so damagingly should be removed.’
Stamp duty starts at 2 per cent above a threshold of £125,000 and then steps up to 5 per cent above £250,000. Above £925,000 they pay 10 per cent and above £1,500,000 the tax rate rises to 12 per cent.
First-time buyers don’t pay on the first £300,000 of a home’s value, and property investors and second home owners pay a surcharge of 5 per cent on top of the usual rates.
Cut stamp duty: The boss of Berkeley wants the home buying tax to be cut
The FTSE 250-listed firm said London was delivering less than 10 per cent of its annual Government-set housebuilding target.
It now takes eight years to complete a block of flats in the capital, compared to five a decade ago, the company added.
Berkeley said it wanted the Government to take action to cut property taxes and reduce disincentives within the planning and regulatory systems.
Executive chair Rob Perrins said further intervention would be needed if Labour wants to hit housing targets, as lengthy planning delays, stamp duty surcharges and regulatory burdens were deterring investment and preventing major regeneration projects from starting.
In annual results published today for the year to April, the group said its pre-tax profit fell by 15 per cent to £451million. Revenue fell 4 per cent to £2.4billion, though this was above analyst forecasts.
4,076 homes were sold over the period, against 4,047 the previous year. The company’s average selling price was £546,000, down from £592,000.
The company said the level of customer enquiries it received remained ‘encouraging’, but buyers without an immediate need to move continued to show little urgency.
Earnings per share slipped 11 per cent to 332p, marginally undershooting forecasts. The firm’s operating margin fell from 20.1 per cent to 18.7 per cent.
In April the housebuilder announced it was stopping all land buying due to an ‘unprecedented increase in cost and regulation’.
The business said it was focusing on its existing land holdings and those in the pipeline, which number over 50,000 and 11,000 respectively. The expected future gross profit on this land bank is around £6.4billion.
It reiterated its target to generate more than £1.4billion of pre-tax profit over the four years to 2030.
Perrins said the firm’s ‘prioritisation of cash generation and disciplined capital allocation will allow us to continue with shareholder returns, increasing the cadence of share buy-backs where the share price is below net asset value per share’.
The group spent £233million repurchasing shares during the year at an average price of £37.10. It said share buybacks were ‘the best way to maximise shareholder value’.
Richard Hunter, head of markets at Interactive Investor, said the company’s focus on London and the south east of England had been both a ‘blessing and a curse’.
He added: ‘On the one hand, higher house prices following on from a systemic undersupply of homes, employment levels remaining strong and the recent round of wage rises, while inflationary, helped mitigate some of the effects of the economic backdrop.
‘However, more recently a red flag emerged from its September trading statement, where Berkeley revealed that new housing starts in London were currently at levels not seen since the Great Financial Crisis of 2008.’
Hunter said: ‘For Berkeley, a share price decline of 11 per cent over the last year compares to a gain of 7.5 per cent for the wider FTSE 250, to which it has been relegated this week. The price is down by 27 per cent over the last two years, and by 42 per cent since the pre-pandemic highs of January 2020.’
Chris Beauchamp, chief market analyst at IG, said: ‘The problems of the housing industry are far from over despite the US-Iran deal, as shown by the low forward sales levels in Berkeley’s latest numbers.
‘Consumers appear to be biding their time, and interest is only likely to recover slowly, even though BoE rate hikes seem a much-reduced possibility.’
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Freetrade
Freetrade
Investing Isa now free on basic plan
Trading 212
Trading 212
Free share dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.