Housebuilder Berkeley says UK stamp duty changes could slow top-end sales

London-focused housebuilder says changes to stamp duty could deter buyers and slow top-end sales of £937,000 or more

PUBLISHED : Wednesday, 10 December, 2014, 6:08am
UPDATED : Wednesday, 10 December, 2014, 6:08am

A tax increase on the purchase of high-end properties imposed by British finance minister George Osborne could deter people from buying the most expensive homes, London-focused housebuilder Berkeley warned.

Announcing an 80 per cent first-half profit rise that helped send its shares to their highest in nine months, Berkeley nonetheless cautioned over stamp duty changes set out last Wednesday which mean it costs more to buy a house worth more than £937,000 (HK$11.3 million).

The housebuilder has benefited from the strength of the housing market in London, where it has four-fifths of its business, but said the duty changes could mean less activity at the top end.

Around 15 per cent of Berkeley's turnover is on homes worth more than £2 million and managing director Rob Perrins said the higher tax on top-end buyers, the latest change to the system, could make them think twice before purchasing.

"The buyer will absorb the price but if he thinks he's going to get taxed more, he'll put off the decision to buy at all ... so you'll get lower sales rates out of it," he said, adding that overall the change would not significantly affect the firm.

Housing is set to be a key issue in an election due by May 2015, with Britain's opposition Labour party proposing an annual "mansion tax" on properties worth more than £2 million, whereas stamp duty is a one-off payment on every sale.

"If a mansion tax comes in at a reasonable level, London homebuilding can drop by a third," Perrins said.

The stamp duty changes meant the top rate rose to 12 per cent on properties worth over £1.5 million. The previous highest level was 7 per cent on homes over £2 million.

The government said nearly all buyers would see a tax cut, whereas homes over £937,000 would face a steeper levy.

Berkeley, however, was happy enough with the current market to raise its own full-year guidance thanks to both strong demand and new developments, saying that it expected to meet market expectations.

The developer, which built 3,742 homes last year, is expected to post a full-year underlying pre-tax profit of £455 million, according to a Thomson Reuters poll of 13 analysts, up from £380 million last year.

It said its pre-tax profit had risen to £305 million in the six months to October, including a one-off asset sale of £85 million.