Is housing policy damaging the London market?
According to the Berkeley Group, government housing policy, while helpful outside London, has had a negative effect on the capital meaning that London will fall well short of its targets for new homes.
In a trading statement for the period May to August issued today, the firm confirmed that since reporting its full year results in June there was a hiatus around the referendum before August returned to “the relative levels reported for the first five months of the year” – approximately 20% down on August 2015.
The firm reported that site visitor numbers and enquiries had been at similar levels to the same period last year but that “customers are taking longer to commit”. Prices are resilient with reservation cancellation rates normal following a temporary and expected increase after the EU vote.
Berkeley said it has been “selective” in the land market in the period acquiring just two sites.
“What is increasingly clear is that government policy, which has been helpful outside London, has had a negative effect on the capital,” Berkeley said. “Transaction taxes are now too high and this is restricting both mobility in the second hand market and the pace of supply and delivery of new homes in London and the south east. There is also a tension between the national policy on Starter Homes and the London Mayor’s ambition to build more affordable housing, while the very high rates of the community infrastructure levy adopted by local authorities now pose a significant threat to development viability.”
While these challenges persist, and the barriers to entry for small builders remain high, London will fall well short of its targets for new homes. This is not just a problem for business and ordinary people in the capital but for the country as a whole. London is the engine of our national economy and the principal driver of fiscal revenues. So this is not just a question of housing Londoners – important though that is. It poses a risk to deficit reduction and the prosperity of the whole country.”
Despite this the firm reported record forward sales and re-iterated its guidance that it aims to deliver £2 billion of pre-tax profit over the three years ending April 30 2018. The first £0.5 billion of this was delivered in the year ended April 30 2016.