Berkeley freezes land deals as costs bite

Berkeley Group is halting new land purchases and slowing construction, marking one of the sharpest signals yet that Britain’s housing recovery remains vulnerable to higher costs, planning friction and tighter development economics. The FTSE 100 housebuilder said the pressure from taxes, regulation and wider market uncertainty has made fresh land buying harder to justify, even as it tries to protect margins and preserve cash.

The decision matters beyond Berkeley because the company is one of the country’s most closely watched developers, with a strong presence in London and the South East and a business model centred on large, complex brownfield regeneration schemes. When a builder of that scale chooses to pause land acquisitions, it suggests that the constraints facing the sector are no longer limited to buyer affordability alone but extend to the viability of future supply. Reuters reported that Berkeley’s shares fell by nearly 19% after the announcement, underlining investor concern that profit growth will be slower through the end of the decade.

Berkeley’s management linked the move to a combination of geopolitical instability, cost inflation and the prospect that interest rates may stay higher for longer than previously hoped. That comes on top of the regulatory overhaul that has reshaped development after the building safety crisis. The company has previously warned that the volume and pace of rule changes were already weighing on new home delivery, particularly in higher-rise urban projects where compliance, approvals and redesign work can add time and expense before a scheme moves ahead.

Taxes are also part of that squeeze. Berkeley’s 2025 full-year results showed it paying corporation tax at 25% alongside the 4% Residential Property Developer Tax on qualifying profits. That charge was introduced as part of the post-cladding policy response, and developers have also been preparing for the Building Safety Levy, which government guidance and industry legal briefings say is due to take effect in England from 1 October 2026. The levy is intended to help fund the remediation of unsafe residential buildings and is expected to raise about £3.4 billion over a decade. For developers, it adds another layer of cost to schemes that are already being stress-tested against build inflation, affordable housing requirements and slower sales rates.

That helps explain why Berkeley is turning inward rather than outward. Instead of chasing new sites, the group said it would focus on extracting value from its existing land bank and controlling expenditure. The strategy is consistent with its longer-term emphasis on capital discipline. Berkeley has previously highlighted its pipeline, planning consents and cash generation as buffers in more difficult markets, and it is still targeting more than £1.4 billion in pre-tax profit across the financial years 2027 to 2030 while aiming to keep operating margins within a 17.5% to 19.5% range.

For ministers, the announcement is awkward. The government has made housebuilding a central economic pledge, with a target of 1.5 million homes over the life of the parliament. Yet official forecasts and market commentary have pointed to a shortfall, reflecting high borrowing costs, labour constraints, planning delays and weak delivery in London. Reuters has reported that ministers have sought to speed projects by scaling back reviews, changing planning rules and pressing ahead with broader reform, while London authorities last month unveiled emergency measures intended to revive stalled development in the capital.

London is especially important in Berkeley’s case because the city’s housing model has become increasingly difficult to balance. Developers have argued that affordable housing quotas, infrastructure contributions, second staircase requirements on taller buildings, gateway approvals under the building safety regime and higher financing costs have all chipped away at viability. A package announced by Housing Secretary Steve Reed and Mayor Sadiq Khan on 25 March sought to ease some of those pressures temporarily, including by lowering affordable housing requirements in some circumstances. Berkeley chairman Rob Perrins welcomed that shift, saying it could help unlock housebuilding, though the company’s decision this week shows that broader financial and regulatory pressures remain far from resolved.