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Geopolitics · Homebuilding · Profit Outlook · UK Housing
British homebuilder Berkeley Group significantly reduced its profit outlook through 2030 and halted new land purchases, citing geopolitical uncertainty and the risk of higher interest rates, causing its shares to drop nearly 19%.
Berkeley now expects over 1.4 billion pounds ($1.9 billion) in pre-tax profit from fiscal 2027 to 2030, with fiscal year 2026 pre-tax profit projected at 450 million pounds. The company targets operating margins of 17.5% to 19.5%, a decrease from previous margins above 20%, to absorb higher costs.
According to Reuters, the Middle East conflict and potential for sustained higher interest rates dampen hopes for a housing market recovery, impacting demand and pushing up building costs. Berkeley, a London-focused developer, stated it cannot achieve its required rate of return on new land due to increased tax and regulatory burdens.
JPMorgan analyst Zaim Beekawa noted that while the 2 billion pounds shareholder return program remains, the lower earnings trajectory disappoints investors. Rivals Taylor Wimpey and Bellway have also issued margin warnings.
