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Berkeley squares up to government

Last updated: 10:07 06 Dec 2013 EST, First published: 11:07 06 Dec 2013 EST

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House builder Berkeley Group’s (LON:BKG) sparkling interim results were achieved with minimal help from the government’s ‘Help to Buy’ scheme.

The ‘Help to Buy’ scheme has been a boon to the house building sector but Berkeley said the impact has been limited on its schemes.

“Since its launch, ‘Help to Buy’ has been used on 117 of Berkeley's sales, predominantly on developments outside London where market demand is led by owner-occupiers. Overall, ‘Help to Buy’ is expected to be used in less than 5% of Berkeley's overall transactions, but on the 14 sites where it qualifies for use, the product accounts for approximately 30% of all sales and has encouraged additional delivery to meet demand,” the company revealed.

The fact is, Berkeley Group is focused on London and the south of England, and that region has not needed any boost from government initiatives to fuel demand. As the company noted, “London continues to attract inward investment from the UK and overseas because of its strong global reputation, a stable social and political environment, strong housing demand and an inherent lack of supply of new housing”.

While the government’s ‘Help to Buy’ scheme has made it easier for some buyers to get a foot on a rung on the housing ladder, the irony is that its success has fuelled a house price surge that is rapidly pricing many first time buyers out of the market.

As most pundits agree, what is needed is a significant increase in housing stock and in that regard Berkeley’s results had some good news. The group is now delivering more new homes than it was just before the financial crisis in 2008 and is building on every one of its sites which has a viable planning consent and vacant possession.

The FTSE 250 firm said it has the capacity to invest further, which would create more homes and jobs, but is “concerned by the increased uncertainty created by the ongoing debates surrounding the future of property taxation and international buyers”.

That comment could be interpreted as a none too subtle application of pressure on the coalition government not to introduce measures that would put a dent in Berkeley’s profits, though judging by this morning’s interims, which revealed half-year post-tax profits were up 22% to £131mln, Berkeley’s bottom line could withstand a little bit of a relapse in London house prices.

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