House prices in London are unlikely to fall despite rising interest rates and inflation because the city has such a chronic undersupply of housing, the biggest developer of new homes in the capital has said.
FTSE 100 developer Berkeley Group said on Wednesday that demand for London housing was solid despite growing fears about the economy.
“The economic and operating environment remains volatile with inflation, labour and materials shortages, interest rates and regulatory costs of development all having the potential to impact supply and demand,” said Berkeley.
But “the ongoing undersupply of housing” meant that, even in such a challenging environment, demand was outstripping supply, added the builder.
Berkeley posted pre-tax profits of £552mn for the 12 months to the end of April, a 6.4 per cent increase on the previous year, even as operating expenses rose 18 per cent to £157mn.
The company, which claims to be responsible for one in 10 new homes built in London, said cost inflation caused by Russia’s invasion of Ukraine and supply chain disruption was being offset by rising house prices.