UK homebuilder Berkeley warns of slowing supply in sector

By Aby Jose Koilparambil

(Reuters) -High-end British homebuilder Berkeley warned on Wednesday that supply of new-build homes will slow down even as it forecast a slight rise to its 2023 profit, as concerns loomed over an impending downturn in the housing sector.

"You are going to see supply fall because schemes will become unviable and marginal schemes will not start. It will be supply side inflation, not a demand side shock," Berkeley Chief Executive Officer Rob Perrins told Reuters.

Surveys on Britain's housing market have showed signs of a slowdown in recent months as fast-rising inflation and higher interest rates mean higher prices and borrowing costs, tightening the financial squeeze for many households.

UK house prices have remained firm although the pace of growth has slowed in recent months and some industry analysts expect the market to cool, as the surging cost of essentials from fuel to home appliances puts pressure on household finances.

Shares of the FTSE-100 builder fell as much as about 7% to 3,532 pence in midday trading, as the broader London market fell 1.1%.

Cobham-headquartered Berkeley became the latest major UK housebuilder to acknowledge challenges from macroeconomic events, including the Ukraine crisis and cost pressures, even as trading and demand remain strong.

"Investors are focusing on rising interest rates, falling consumer confidence and fears of a recession, especially as acquisitions, dividends and buybacks are whittling down the FTSE 100 firm’s net cash pile," said AJ Bell Investment Director Russ Mould in a note.

The company expects pretax earnings of about 600 million pounds ($733.92 million) for the year ending April 30, 2023 after posting a 6.4% rise in profit on Wednesday.

Berkeley, which operates mainly in London, Birmingham and the South of England, said it was targeting building more than 4,000 units in 2023, up from 3,760 houses built in 2022.

Berkeley's net cash position in the year through April dropped to 269 million pounds, from 1.13 billion pounds a year earlier.

($1 = 0.8175 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Shailesh Kuber and Bernadette Baum)