Berkeley Profit Beats Analysts’ Estimates as Prices Rise

Berkeley Group Holdings Plc (BKG), the U.K. homebuilder focused on London and southeast England, said full-year profit climbed 40 percent as it increased prices and built almost a third more homes than at the market’s 2007 peak.

Net income increased to 292.9 million pounds ($497 million) in the 12 months through April from 209.7 million pounds a year earlier, the Cobham, England-based company said in a statement today. That beats 283 million pounds, the average of nine estimates compiled by Bloomberg.

U.K. homebuilders have reported surging sales and profit this year after mortgage lending rebounded to a six-year high and government policies reduced the amount needed by first-time buyers for down payments. Concerns that a property bubble may be forming in London has put pressure on the government and the Bank of England to take steps to cool the market.

“The last year has seen a surge of confidence within the U.K. economy,” Chairman Tony Pidgley said in the statement. “Housebuilders have been at the forefront of the return to growth.”

BOE Governor Mark Carney on June 12 signaled that borrowing costs may start to rise earlier than previously expected. That could suppress home-price gains by limiting borrowing. The central bank is also getting new powers from Chancellor of the Exchequer George Osborne to curb home loans.

Influential Factors

The U.K. housing market will remain positive if wages grow enough to compensate for higher interest rates or tighter controls on mortgage lending, Berkeley Chairman Tony Pidgley said in the statement. Monetary policy and the stability of banks are both factors influencing the housing market in the long term, he said.

Berkeley sold 3,742 new homes during the year, up from 3,712 a year earlier and 30 percent more than the peak of the market in 2007, according to today’s statement. The average sales price increased to 423,000 pounds from 354,000 pounds. The homebuilder plans to pay an interim dividend of 90 pence a share in September.

“Across all price ranges, we’re seeing good demand,” Rob Perrins, Berkeley’s managing director, said in a phone interview. The company has created 3,000 jobs this year and could add as many as 2,000 more by the year’s end.

Berkeley fell 1 percent in London trading to close at 2,238 pence. The stock has declined about 16 percent this year, making it the second-worst performer on the 10-member Bloomberg U.K. Homebuilder Index.

Rising sales, higher prices and increased payouts to shareholders have failed to lift the shares of most homebuilders this year after the homebuilder index rose 47 percent in 2013. Only two of the companies, Abbey Plc and Persimmon Plc, are up this year.

To contact the reporters on this story: Jeffrey St.Onge in London at jstonge@bloomberg.net; Patrick Gower in London at pgower@bloomberg.net

To contact the editors responsible for this story: Andrew Blackman at ablackman@bloomberg.net Ross Larsen

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