Daily Mail

Housing revival bolsters builders

- By Hugo Duncan

BERKELEY Homes yesterday reported a 40pc leap in profits following a ‘surge of confidence’ in the UK economy – but warned political meddling could hit business. The company became the latest builder to benefit from booming demand for new homes as it said profits rose from £270.7m last year to £380m this time around.

The bumper results triggered another mammoth pay day for founder and chairman Tony Pidgley who owns nearly 6.8m shares in the company or just over 5pc.

Berkeley proposed a dividend of 90p a share on top of the 149p a share it paid to shareholde­rs during the year – handing Pidgley a total of £16.2m.

Shares in the firm dipped 23p to 2238p – but Pidgley’s stake was still worth nearly £152m at the close of business last night.

Housebuild­ing stocks have soared on the back of the recovery in the housing market but have been under pressure in recent weeks amid talk of higher interest rates and a clampdown on mortgage lending.

Bank of England governor Mark Carney this week said policy makers ‘will not hesitate’ to take action to cool the market and prevent a new crisis if it threatens to spiral out of control.

But Clyde Lewis, an analyst at stockbroke­r Peel Hunt, said the sell-off in Berkeley since its recent high of 2780p in February was ‘too good to miss’ and advised investors to buy the stock.

Berkeley specialise­s in upmarket homes and apartments in London where the property market is red hot. It has built around 10pc of new homes the capital in the last five years.

The Office for National Statistics this week said house prices in London have risen by nearly 19pc over the past year to £485,000 – fuelling fears of a bubble.

Berkeley sold 3,742 newly built homes in the year to the end of April – up from 3,712 the previous year and 30pc more than at the peak of the previous boom in 2007 – for an average price of £423,000.

Pidgley, a former Barnado’s boy who was adopted at the age of four and founded Berkeley in 1976, welcomed the ‘strong results’.

He said: ‘The last year has seen a surge of confidence within the UK economy.

‘Housebuild­ers have been at the forefront of the return to growth, creating a feelgood factor which benefits everyone.’

Pidgley, who is known for his ability to pick peaks and troughs in the housing market, said the industry has the capacity to increase the supply of new homes across the country in the coming years with the help of schemes such as Help to Buy.

But he warned of risks stemming from next year’s general election – including ‘the uncertaint­y surroundin­g future tax policy and political decision making’.

He said: ‘ The group remains alert to the uncertaint­y which will arise from changes to the economic and political landscape in the run-up to a 2015 general election and may impact the business and the market more generally.’ Pidgley also warned that higher interest rates could hit demand unless they are accompanie­d by higher wages.

‘Provided any future increases in interest rates or regulation of mortgages are matched with future wages growth as the economy expands, the prospects for the housing market remain positive,’ said Pidgley. Chris Millington, an analyst at Numis, put a target price on the stock of 2491p. ‘In our view, Berkeley is too cheap, in keeping with the wider housebuild­ing sector, although the share price may be held back over the next year due to political rhetoric concerning the London housing market in the run up to the general election.’

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