Berkeley Group Urges Stamp Duty Cut to Boost Housing Market

Berkeley Group, a leading housebuilder in London, is advocating for a reduction in stamp duty to revitalize the struggling new-build housing market. The company reported a 15% decrease in pre-tax profits to £451 million for the year ending April, alongside a 4% dip in revenue to £2.4 billion. Executive Chairman Rob Perrins stated that without "more decisive intervention" from the government, there is "no prospect of material improvement" in the number of homes being built.

Perrins attributed the decline in demand and supply of new homes to over a decade of increasing stamp duty land tax (SDLT) and new surcharges. He proposed that the SDLT on all new homes should be reduced to a maximum of 3%, with a zero rate for first-time buyers. He also called for the removal of SDLT surcharges that he believes deter investment in new-build properties.

Currently, stamp duty begins at 2% for properties above £125,000, stepping up to 5% above £250,000. Rates increase to 10% above £925,000 and 12% for properties exceeding £1.5 million. First-time buyers are exempt on the first £300,000 of a home's value, while investors and those purchasing second homes face an additional 5% surcharge.

The company highlighted that London is currently meeting less than 10% of its annual housing construction targets. It also noted that completing a block of flats in the capital now takes an average of eight years, compared to five years a decade ago. Berkeley has called on the government to address property taxes and streamline planning and regulatory systems, arguing that lengthy delays and regulatory burdens are hindering investment and preventing regeneration projects.

In the fiscal year reported, Berkeley sold 4,076 homes, a slight increase from 4,047 the previous year, but the average selling price fell from £592,000 to £546,000. The company noted that while customer inquiries remain "encouraging," buyers without immediate housing needs are showing little urgency to proceed.

Berkeley had previously announced in April that it was halting land acquisitions due to a significant increase in costs and regulations. The firm is now concentrating on its existing land holdings, which number over 50,000 plots, and those in the pipeline, estimated at 11,000. The expected future gross profit from this land bank is approximately £6.4 billion. The company reiterated its target to generate over £1.4 billion in pre-tax profit between 2026 and 2030.

Richard Hunter, head of markets at Interactive Investor, commented that Berkeley's focus on London and the South East has historically been beneficial but has also presented challenges. He noted that while strong employment and recent wage increases have offered some buffer, new housing starts in London have reached levels not seen since the 2008 financial crisis. The company's share price has seen a decline of 11% over the past year, underperforming the wider FTSE 250 index, and is down 42% from its pre-pandemic highs in January 2020.