UK homebuilder Berkeley targets rental market, raises 2025 outlook

Berkeley targets rental market: Berkeley lifted its earnings outlook for 2025 on Wednesday, first FTSE 100 homebuilder to do so in more than two years, and said it would start a build-to-rent platform, amid robust demand for rental homes in London and South East England.

Shares in Berkeley, however, fell more than 3 per cent in morning tring, top percentage loser on blue-chip index.

"Investors were largely unmoved by slight increase in guidance for current financial year, although this may reflect a recent strong run for shares and also modest drop in margins and profit reported for full year," AJ Bell analysts said in a note.

While company expects a fall in 2025 pretax profit, it justed its forecast higher to 525 million pounds, citing "good enquiries" for homes in Britain's most under-supplied markets.

CEO Rob Perrins said build-to-rent segment, to be developed over 10 years, was aimed at maximising its returns in current market conditions. company did not specify how much it would invest in this project.

Sticky inflation in Britain h clouded outlook for an easing of monetary policy, tempering expectations for a swift recovery in housing market despite signs of stability at start of 2024.

group h identified about 4,000 homes across 17 brownfield regeneration sites, involving derelict or abandoned properties or buildings, as an initial portfolio for platform.

Estate agency Savills earlier this year said that an ditional one million rental homes were required by 2031 to dress a growing national rental crisis.

" build-to-rent platform... points to significant potential in private rental market," RBC Capital Markets analysts wrote in a note.

High-end builder Berkeley, which, unlike its bigger rivals, focuses on redeveloping land previously used for industrial purposes, said current lack of urgency in housing market was likely to remain until interest rates began to come down.

British inflation returned to its 2 per cent target in May for first time in nearly three years, data showed on Wednesday, but underlying price pressures remained strong, meaning Bank of England is likely to wait longer before cutting rates.

Berkeley, which operates across London, Birmingham, and south of England, reported an 8 per cent fall in pretax profit to 557.3 million pounds ($708 million) for year ended April 30.

That still exceeded 549.5 million expected by analysts, LSEG data showed.