Having been in the doldrums for several months, shares in housebuilder Berkeley (BKG) rallied to the top of the FTSE 100 leader board with a rise of 4.6% to £48.50 after the firm raised its profit outlook for the next three years on a substantial increase in home sales.
After a strong first half, in which the south of England focused builder completed 1,828 new homes at an average price of £647,000 or more than twice the national average, generating a 26% increase in pre-tax profits, chief executive Rob Perrins raised earnings guidance by 5% for the current year to roughly £518 million.
‘The first half performance reflects Berkeley's conviction and investment in its strategy over the last 18 months, which is focused on London and the South East, the country's most under-supplied housing markets’, said Perrins.
Thanks to the visibility of the order book and the resilience of the housing market overall, Perrins set a target of £625 million for pre-tax profits in three years’ time against consensus forecasts of less than £600 million, driven by a 50% increase in volumes from pre-pandemic levels.
The first half also marked a significant rise in shareholder returns to £486 million from £171 million a year ago, largely due to the B-share return of capital in September which was followed by a share consolidation.
Perrins also reaffirmed the company’s commitment to return £282 million or the equivalent of £2.52 per share each year up to the end of September 2025.
According to both the Halifax and Nationwide building societies, average UK house prices are at an all-time high, although government data shows the number of transactions falling sharply since the end of the stamp duty holiday.
The Halifax house price index for November showed prices rising for a fifth straight month after a very minor drop in June with the annual rate of inflation topping 8% and the average house now costing nearly £273,000.
On a quarterly basis, house price inflation hit 3.4%, the strongest level since the end of 2006, while on a regional basis the average price of a property in Wales broke above £200,000 for the first time.
The Nationwide house price index recorded an even stronger rise of 10% in November, taking the average house price to £252,687 or 15% higher than March 2020 before the pandemic.
However, according to HMRC figures, monthly property transactions in October fell 52% from the previous month and 28% from October 2020 while mortgage applications fell 32% on last year according to figures from the Bank of England.