March 13 (Reuters) - High-end homebuilder Berkeley reaffirmed its annual profit guidance on Friday, but cautioned that the conflict in the Middle East was weighing on risk sentiment amid the prospect
UK homebuilders warn Middle East war compounds affordability crisis
By Raechel Thankam Job
Impact of Middle East Conflict on UK Homebuilders
March 13 (Reuters) - Britain's homebuilders are bracing for another blow from the war in Iran, which threatens to push up building costs and keep interest rates elevated just as the industry is struggling to emerge from a prolonged slump in demand and profitability.
Profit Outlooks and Industry Warnings
The UK's Berkeley Group on Friday reaffirmed its annual profit outlook, but warned that the conflict in the Middle East posed a risk of a "further deterioration in macro conditions", echoing concerns from other builders such as Vistry and Persimmon in recent days.
Rising Costs and Inflation Concerns
The war has pushed up oil and energy prices, raising concerns that energy-intensive building materials like bricks and plasterboard could see sharp cost increases.
Mortgage Market Disruption
"The big issue now is energy costs, how that feeds through to inflation expectations," Investec analyst Aynsley Lammin said, adding that mortgage market disruption has already begun as swap rates rise.
Lammin noted that higher mortgage rates make it harder for builders to pass on costs, as buyers are more constrained.
Major Builders Already Feeling the Squeeze
Britain's largest homebuilder Barratt Redrow in early February cut its dividend after earnings fell as it ramped up incentives to stimulate demand.
Profit Margins and Demand Outlook
Taylor Wimpey and Vistry last week warned that profit margins and demand will remain subdued in 2026, with Vistry warning that a prolonged war could translate into higher build costs and weaker consumer sentiment.
Persimmon's Position
In contrast, Persimmon, which makes its own bricks, tiles and timber frames, issued a robust profit outlook even as it warned that the impact of the Iran conflict on customer sentiment "remains to be seen".
Berkeley's Performance and Strategy
Berkeley, which focuses on London and the South East, said sales enquiries and underlying reservations were recovering towards summer levels, though geopolitical events and economic uncertainty weighed on trading between November and February.
The developer has so far reported operating margins above 20%, outpacing rivals, whose margins sit between 8% and 14%, though luxury home taxes introduced in the British government's November budget are expected to add some pressure for Berkeley.
Future Plans Beyond 2027
Beyond 2027, the company said it will focus on cash generation and optimising land holdings and its new build-to-rent platform.
(Reporting by Raechel Thankam Job in Bengaluru; Editing by Emelia Sithole-Matarise, Kirsten Donovan)
