Berkeley chief says housing sector could weather a rate hike

The feel-good factor will underpin the UK housing market, regardless of any hike in interest rates, the stock market's number two house-building group said yesterday.

Tony Pidgley, managing director of Berkeley Homes, said there was no evidence that the downturn in the financial markets was having an impact on the property market. But he sounded a warning that Britain's growing balance of payments deficit might trigger a downturn. Chesterton and Savills, rival up-market property groups, have already issued profit warnings.

"I don't see this weakness. We would need to see some disaster in the economy and salaries come down" to hurt the property market, said Mr Pidgley, adding that "a wary eye" needed to be kept on housing affordability.

Interest rates would have to touch double digits to have any significant impact market impact, he said. Mr Pidgley also said investors from the Middle East were returning to the London market and buying in "million job lots".

Berkeley, which specialises in redeveloping brownfield sites in city centres, posted annual pre-tax profits up 24 per cent at £178m. Average selling prices rose from £251,000 to £278,000 last year, and were expected to touch £300,000 this month.

The group's most expensive sale last year fetched £2.8m. Three properties went for more than £2m, and 24 homes sold for more than £1m.

However, the number of completions fell 13 per cent from 2000's numbers because of weaker construction activity during the winter.

Michael Freshney, the group's commercial director, is to retire, Berkeley said, because he had decided that his role was "not big enough".