Berkeley rejects May’s call for more new houses

Property developer warns stamp duty and mortgage rules hinder government plans for extra homes

ONE of Britain’s biggest housebuilders has dismissed Theresa May’s demands for a boom in new homes, claiming it cannot increase the supply because of constraints on buyers such as stamp duty and mortgage rules.

Berkeley Group said that the high cost of moving house, economic uncertainty and a limit of mortgage lending meant that it was “currently unable to increase production beyond the business plan levels”.

The news came as the Bank of England warned that increasing numbers of home buyers are stretching themselves to take mortgages of more than four times their income.

Such loans may be affordable now with low interest rates, but when costs rise some borrowers will be unable to meet their repayments, causing problems for banks.

Berkeley also suggested that a fall in domestic buy-to-let investors, who have been hit by increases to stamp duty, and the “time and complexity of getting on site following planning approval” were curbing any increases to its building output.

While “the fundamentals of the market in London and the South East remain compelling” it said, “the operating environment and its impact on transaction volumes … do not support the step-up in Berkeley’s production levels that these markets so badly need”.

The news is a blow to Theresa May, who has beefed up her rhetoric against housebuilders in recent weeks. In a speech earlier this month she suggested that they were to blame for the UK’S chronic housing shortage, and accused them of sitting on land that has planning permission rather than actually building on it. George Salmon, equity analyst at Hargreaves Lansdown, said Berkeley’s stance showed that a “Mexican stand-off ” was developing between housebuilders and the Government.

“[Berkeley’s] comments on the complexity of getting work started is a clear signal to the Government that it believes the best way to move forward is not to churn through the land on its books, but to remove the red tape around the development process,” he added. Shares in the company were down as much as 6.58pc yesterday, to £35.65. Berkeley said that it would remain cautious about its spending, only buying land on a selective basis, but it added that it was confident of hitting its previous target of delivering at least £3.3bn of pre-tax profits between May 2016 and April 2021.

Shareholders will receive a £76.3m payout next week, on top of share buybacks worth £62.9m. Meanwhile, Bank of England officials warned a “bunching” of large numbers of loans at just below the maximum level of 4.5 times income is a potential growing risk.

Almost 30pc of new mortgages now go to borrowers with a loan-to-income ratio of more than four times. Mark Carney and the Financial Policy Committee (FPC) are not stepping in with a further crackdown yet, but told banks action could be taken if current trends continue. The FPC warned of “some signs of rising domestic risk appetite” in the mortgage and corporate loan markets.

Mortgage borrowers have to prove to lenders that they can afford their repayments even if interest rates jump by three percentage points. Now interest rates are going up, that threshold rises. But it will not affect the loans already given out when rates were lower.