Berkeley Group has warned of a further deterioration in the housing market and urged the Government to reform stamp duty, describing the tax as a "binding constraint" on transactions.
The London-focused housebuilder said war in the Middle East and ongoing political uncertainty had hit consumer sentiment, with policy decisions dragging further on activity and buyers delaying transactions until after the Budget.
Berkeley renewed its calls for "urgent" stamp duty reform, warning that "far more tax revenue is being lost through depressed activity than is being gained."
Call for a one per cent cap
Berkeley wants stamp duty for first-time buyers and downsizers to be capped at one per cent. Stamp duty is a tax paid by buyers when they purchase property in England and Northern Ireland, with an additional surcharge applied to buyers who already own one or more residential properties and are purchasing an additional one.
The housebuilder said stamp duty was introduced when interest rates were 0.25 per cent but now needed urgent reform to stimulate the market.
"What was a manageable frictional cost when interest rates were at those unique and unsustainable levels, has become a binding constraint, now that interest rates have returned to more normal levels," Berkeley said.
The Office for Budget Responsibility, the Government's independent fiscal watchdog, has historically estimated that for every one per cent cut in stamp duty, transactions may increase by up to six per cent.
Chancellor John Healey is due to unveil his Budget on October 28.
Boost for first-time buyers and rental supply
Berkeley said its proposed measures would help first-time buyers, encourage older owners to downsize and support investment in homes for rent.
Higher transaction levels would in turn improve the viability of new schemes and support the delivery of affordable housing alongside private homes, the housebuilder said.
Berkeley joins a chorus of housebuilders calling for lower stamp duty and government support for first-time buyers to ease affordability constraints.
The company said that amid war in the Middle East and "ongoing political change and uncertainty" in Britain, "sentiment and core economic indicators have been further impacted, with a consequential effect on trading and general housing market activity."
Cautious buyers hold back
Berkeley said: "While Berkeley is receiving good and stable levels of enquiries, the uncertainty and volatility in the market means that customers without an immediate need to move and readily available liquidity remain more cautious to commit, a position similar to that reported with our full year results in June."
The housebuilder said it was "mindful" that some buyers may defer property transactions until after October's Budget and "any election uncertainty dissipates."
Some British housebuilders, including Berkeley, have curbed land buying and slowed construction as affordability concerns, political turmoil and energy-driven cost inflation take hold.
Profit target and share price
Berkeley, which builds homes across London and southern England, said it was fielding good and stable levels of enquiries, but that customers without an urgent need to move and ready cash remained reluctant to commit.
The group said it was pressing ahead with its goal to make £1.4 billion in pre-tax profit over the next four years, with profits expected to be slightly weighted towards the first half of the current financial year.
Berkeley's shares slipped 0.12 per cent, or 4.00p, to 3,290.00p on Friday, having fallen nearly 10 per cent over the past year.
Analyst view
Richard Hunter, head of markets at Interactive Investor, an online investment platform, said the shares had "inevitably been impacted by the dour sentiment around the sector, having fallen by 9 per cent over the last year as compared to a gain of 10 per cent for the wider FTSE 250, to which it was relegated in June."
He added: "The price is also 44 per cent below the pre-pandemic highs of January 2020, overriding the group's strategic nous and unwavering focus on a longer-term strategy."
Hunter said there was "little new news" in Berkeley's update, meaning the market consensus of the shares as a hold would likely remain in place "until such time as there are some signs of the green shoots of recovery."
