LAG IN DEVELOPERS BUYING LAND COULD SEE HOUSE PRICES RISE

A REDUCTION in the amount of land being purchased by one of Britain’s biggest housing developers could see house prices rising at “unsustainable” rates in the future.

Berkeley, which builds homes across London, Birmingham, and the South of England, recently told investors it had not bought any land over the latest quarter.

The firm will only invest very selectively in new opportunities and flagged high inflation and interest rates weighing on the sector as it reported a slump of more than a third in home reservations.
But the group stood by its profit expectations despite its gloomy outlook for the UK economy.
Commenting on the wider repercussions of this announcement, Jonathan Rolande of the National Association of Property Buyers, said: “Berkeley, like other housebuilders and everyone whose income relies on the housing market will have to brace themselves for gloomier business in the near to medium future.
“Interestingly despite private sales reservations being down by around 35%, the developer expects profits to remain the same. That will be fuelled in part by property prices rising by more than anticipated but it surely must also mean that costs will be cut and redundancies are bound to be a major part of that.
On the impact not buying land could have, Mr Rolande added: “No land has been bought over the last quarter, which is no doubt a prudent decision but it will have repercussions down the line when the market recovers to more normal transaction levels. It increases the likelihood of a lag between supply and demand in the future – something that could see prices rising again at unsustainable rates.

“It also indicates that Berkeley anticipates land becoming cheaper in the future – presumably, they do not agree with the few commentators still saying that this latest downturn is a blip and normality will soon return.”