Berkeley Group Scales Back Housebuilding Amid Surging Costs and Regulatory Burden

Berkeley Group delivered a sobering assessment of the UK residential development landscape on Wednesday, warning that an “unprecedented increase in cost and regulation” had forced the company to scale back its building activity, sending its shares down by as much as 18 per cent in early trading and wiping nearly a fifth off its market value.

The FTSE 100 developer confirmed it has ceased purchasing new land and will reduce build rates across its existing portfolio, citing an inability to generate an acceptable return on investment under current market conditions. Berkeley expects to post a pre-tax profit of approximately £450 million for the financial year ending this month; however, the outlook beyond that point has deteriorated sharply, with the company forecasting aggregate pre-tax profits of £1.4 billion between 2027 and 2030, a figure that falls some £600 million short of prior City consensus estimates.

By mid-morning, Berkeley shares were trading at £29.24, a decline of 511¾p or 14.9 per cent, reflecting the severity of the market’s reaction to the revised guidance.

Chief executive Rob Perrins identified a confluence of pressures bearing down on the business. Delays in obtaining sign-off from the building safety regulator have materially disrupted project timelines, with one development in Kingston, west London, kept on hold for seven years before construction could begin. Perrins described the situation plainly: “That can’t be right. No wonder no homes are getting built.”

Weakened demand has compounded the operational difficulties. Perrins attributed part of the sales slowdown to the ongoing conflict in the Gulf, noting that roughly half of Berkeley’s homes are sold to overseas buyers, a cohort particularly sensitive to geopolitical instability. He cautioned that even a swift resolution to the war in Iran would be unlikely to bring mortgage rates down quickly, given the persistence of inflationary pressures in the credit markets.

Berkeley, which was founded in Surrey in 1976 and operates primarily across London and the South East, has long been exposed to the structural tensions inherent in building in the capital. Mandatory second staircases in taller residential blocks, escalating Community Infrastructure Levy (CIL) payments, and an increasingly complex regulatory environment have all served to erode land values and compress development margins. Perrins remarked pointedly that Big Yellow, the self-storage group, had become the company’s most formidable competitor by virtue of facing none of the tax obligations that weigh on housebuilders.

The news represents a significant setback for the government’s housing agenda. Labour’s target of delivering 1.5 million new homes by the end of 2029 requires 88,000 new homes per year in London alone. Residential development consultancy Molior has estimated that completions in the capital will reach just 4,550 units in both 2027 and 2028, an outcome that lays bare the scale of the delivery gap the government faces.

Perrins acknowledged the Mayor of London’s industry support package, introduced in October, which reduced affordable housing obligations and CIL charges within new developments. He welcomed the intervention but argued it falls well short of what is required, calling on the government to enforce the building safety regulator’s 12-week decision-making deadline, abolish CIL entirely, scrap the building safety levy, and reduce stamp duty. “The government needs to go even further,” he said.

Berkeley’s strategic pivot is unambiguous. The group intends to preserve cash rather than reinvest in new land, with Perrins making clear that this posture will be maintained for as long as current conditions persist. For investors, the profit warning and operational retrenchment signal not merely a company-specific challenge, but a structural crisis of confidence in UK urban development economics; one that policymakers cannot afford to ignore if they are to attract the estimated £30 billion of private capital needed to meet their housebuilding ambitions.