FTSE 100 housebuilder Berkeley has announced it will cease purchasing new land and implement a hiring freeze as geopolitical volatility and reduced prospects for interest rate cuts impact the property market.
The London-focused developer said it would stop buying new land, freeze recruitment and reduce its use of subcontractors in response to what it described as “unprecedented” increases in costs and regulation combined with weak buyer demand.
Shares in the Surrey-headquartered company fell as much as 18% on Wednesday morning, making it the worst performer on the FTSE 100 before recovering slightly to close down nearly 13%.
Profit forecasts revised
Berkeley now expects to report more than £1.4 billion in pre-tax profit from 2027 to 2030, compared with an earlier forecast of approximately £450 million for this year and 2027.
The company stated that in the first two months of 2026, it had “begun to see signs of a modest recovery in sales volumes.” However, it added that “recent geopolitical events and the macroeconomic consequences, including reduced potential for further rate cuts, could reduce confidence in a near-term market recovery.”
Regulatory and cost pressures
Berkeley cited a “continuous increase in the tax and regulatory burden on residential development” as a key factor in its decision to halt land acquisitions. The company said it no longer believes it can achieve a sufficient rate of return on new land purchases.
New building safety processes have “lengthened the time between obtaining planning approval and starting on site by about 12 months,” according to the company. This adds to concerns previously raised by tax advisers warning about construction cost pressures in the housing market.
Mortgage market impact
The ongoing conflict in Iran has contributed to fears around inflation and elevated interest rates. Average mortgage rates in the UK have risen above 5% since the start of the conflict, according to data provider Moneyfacts, placing additional pressure on first-time buyers who remain heavily reliant on mortgage financing.
Last month, rival housebuilders Barratt Redrow and Persimmon were among the worst performing stocks on the FTSE 100, with both losing more than 20% of their value, according to analysis by Interactive Investor.
Development pipeline
Berkeley, which employs more than 2,500 people, focuses on brownfield regeneration projects in urban areas. The company currently has land for 50,000 homes, with a further pipeline for another 10,000 homes in London and the south-east.
The company said it would slow the pace of construction work on existing sites to match market demand and regulatory approvals.
The announcement comes as the UK government pursues ambitious housebuilding targets, with industry bosses citing higher taxation and regulation as significant obstacles to meeting those goals.
