Major house builder to stop buying land and hiring staff due to rising costs and regulation

The update said that in the current economic environment, Berkeley does not believe it can make its required rate of return in new land acquisitions.

It said this is down to the “continuous increase in the tax and regulatory burden on residential development”.

“Berkeley is therefore not proposing to acquire new land while these conditions prevail, except through joint venture arrangements, and will focus on its existing land holdings,” the house builder added.

Other actions included targeting an operating margin within its historic range of 17.5% to 19.5%, which will require both the “maintenance of development margins and further real reductions in operating costs”.

Berkeley confirmed that this will mean a freeze on recruitment, and that a reduction in operating costs will primarily come through cutting back on subcontractors.

Its update said: “With the ongoing conflict and deterioration of the economic outlook, we are reducing work in progress investment to match the sales levels we are currently achieving.

“We are forecasting we can absorb the expected cost inflation through optimisation of our land holdings, and the business plan gives the flexibility and agility to do this.”

Over the past three years, which saw “subdued transaction volumes”, Berkeley took action to strengthen its balance sheet, including limiting new land investment and reducing operating costs from £178m to £150m. 

In the first two months of 2026, the house builder had begun to see a “modest recovery” in sales volumes. But conflict in the Middle East has since reduced the potential for future interest rates cuts and reduced confidence in near-term market recovery, Berkeley said.

As a result of its actions, Berkeley expects to achieve above £1.4bn pre-tax profit over the next four years.

For 2025-26, pre-tax profit is expected to be £450m, in line with guidance.

The house builder said its current business model of developing brownfield regeneration projects in urban areas is “wholly aligned” with the government’s housing policy.

But it said this activity requires “considerable upfront capital investment which in turn requires a stable, predictable and supportive operating environment”.

Berkeley welcomed the government’s emergency housebuilding package for London, which it said has “all the ingredients required to address today’s viability challenge”.

“To be successful, it will now require pragmatic and flexible implementation by local authorities to give home builders the certainty to invest and bring forward currently stalled regeneration schemes at pace to address the decline in new home starts in London, which currently sit at less than 10% of MHCLG’s target,” the update added.

As part of its series of actions to address uncertain market conditions, Berkeley said: “Our focus will be on applying the principles of the new ‘Homes for London’ package to our sites to provide the certainty required to bring forward our long-term regeneration sites at returns commensurate with the development risk.”