Equity prospects

Berkeley Group

Geordie Kidston, Head of Research

Price£32.80

52 week high yield£35.70 - £22.64

Net yield4.6%

Hist / pros per10.5 - 13.1

Equity market cap£4,482m

Berkeley Group is a major FTSE 100 quoted, prime property developer within the London region. It has a highly regarded management team and has pioneered several major luxury projects in areas conspicuous for their degree of urban regeneration. London’s development pipeline of new housing stock looks to be over-built and in surplus and foreign capital flows from China, which we consider to be a prime driver of London’s housing market, could well be affected negatively by the Yuan’s devaluation. I expect to see similar secular pressure on the Gulf States and Russian investment patterns as lower oil prices bite. 

In addition, the Chancellor’s reorganisation of stamp duty earlier this year has reduced London’s housing turnover markedly, particularly at the top end of the market. Similar urban slowdowns are emerging in Australia, New Zealand, Hong Kong, Canada and the core markets in California as capital flight to prime residential property slows in pace, which combine to put pressure on this major property development company.

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