Raw material cost inflation is a big problem in the housebuilding industry and the sector is on the cusp of potentially seeing profit margins squeezed.
Berkeley has flagged that strong selling prices have so far offset the higher cost of building materials, but we’re only weeks away from the end of the stamp duty holiday.
“October is likely to be a testing time for the property market as the lack of the money-saving incentive could see housing activity calm down, thereby bringing down prices with it,” said Russ Mould from AJ Bell.
“If housebuilders can’t cover the extra costs of building materials through higher prices, then they must stomach lower profit margins.
“In the old days, they might have tried to cut corners to save money but the outrage over build quality in the industry a few years ago means only the foolish would attempt to save a few quid here and there by not doing a proper job.
“Berkeley can afford to stomach lower profit margins as it is swimming in cash, and it may take the view that this is only a temporary risk. After all, it is continuing to invest in land as a way of laying the foundations for future value generation.”
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