Berkeley Group Earnings: Weakening Build Costs Bode Well for Homebuilder Profit Margin Outlook

Our near-term forecasts for no-moat Berkeley Group are largely unchanged as first-half fiscal 2024 performance is broadly tracking in line with our expectations. We expect Berkeley to deliver GBP 547 million in pretax profit in fiscal 2024, aligning with the group’s unchanged pretax profit guidance of at least GBP 1.05 billion over fiscal 2024-25. Berkeley’s confirmation that build cost inflation slowed appreciably during the first half is a positive development and a key takeaway from the result that bodes well for the prospective profit margin outlook for Berkeley and its U.K. homebuilder peers. Still, Berkeley's stock price weakened in early trading—down around 2% at the time of writing—ostensibly in response to commentary surrounding the current challenges that the U.K. urban planning system poses. Presently, U.K. urban planning is proving a bottleneck to the attainment of building consents necessary to quickly replenish Berkeley’s development pipeline.