Homebuyers holding out for mortgage rates to fall, housebuilder Berkeley says
Sales reservations in recent months have been about a third lower than the same period a year ago, Berkeley revealed.
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Your support makes all the difference.Homebuilder and developer Berkeley Group has said house sales continued to decline but hopes of lower mortgage costs have sparked interest among buyers.
The group, which specialises in urban regeneration projects and higher-end homes, told investors that it is on track to report a pre-tax profit of £550 million for the latest financial year.
Sales reservations in recent months have been about a third lower than the same period a year ago, it revealed.
While markets aren’t forecasting much of an uplift in the housing market in 2024, there are some early signs that pressures are beginning to ease for housebuilders
It comes amid a prolonged downturn in the housing market, driven by soaring mortgage rates and squeezed household finances.
But Berkeley said that enquiry levels are good, with “customers looking for the prevailing political and economic uncertainty to recede and interest rates to begin to fall”.
It signals that hope is on the horizon for buyers who are holding out for signs that the economic backdrop is turning a corner and mortgage costs could begin to come down later in the year.
According to the latest data from Moneyfacts, the average two-year fixed residential mortgage is about 5.8%, having surpassed 6% last year.
Berkeley, which builds homes across London, Birmingham and the south of England, said it was in a “strong” position having secured all sales for the year ending in April, and more than 70% of sales for the next financial year.
It also revealed that build-cost inflation had stabilised across most trades.
Aarin Chiekrie, an equity analyst for Hargreaves Lansdown, said: “Berkeley’s sitting on solid ground, despite some wobbles in the wider housing market.
“Many of its peers have posted large revenue and profit declines in recent months.
“But Berkeley’s London focus and higher-end product, with an average selling price of £624,000 at the last count, means it offers something different to other large builders.
“While markets aren’t forecasting much of an uplift in the housing market in 2024, there are some early signs that pressures are beginning to ease for housebuilders.
“Mortgage rates have fallen from peak levels, real wages are growing and build-cost inflation has pulled back, giving some relief to industry margins.”