Berkeley Group Holdings PLC (LSE:BKG) shares tumbled 18% to almost a decade's low after it said it will pause new land purchases and slow investment as it adapts its strategy to a weaker housing market and rising regulatory pressures.
The housebuilder, which was already set to drop out of the FTSE 100 in the next reshuffle, said it still expects to deliver pre-tax profit of £450 million for the 2026 financial year, in line with guidance reaffirmed earlier this month, alongside net cash of around £300 million.
But looking ahead, the company expects to generate "above" £1.4 billion of profit before tax over the four years to 2030, working out at an average of £350 million of PBT a year.
It warned that, due to higher costs, tighter regulation and weaker consumer confidence, new developments have become less attractive and it "does not believe it can make its required rate of return" on new land acquisitions.
It will instead focus on its existing pipeline, where the FTSE 100 group holds sites for more than 50,000 homes, and a further 10,000 in the pipeline, primarily in London and the South East.
It will prioritise extracting value from these assets while "tightly sequencing" construction activity and "flexing the pace" of investment in its Berkeley Living build-to-rent business.
Berkeley added that delays linked to the Building Safety Regulator have extended project timelines by around 12 months, further weighing on delivery.
"We will continue to strengthen the balance sheet, maintaining net cash across the period with land creditors continuing to reduce.
"This will allow Berkeley to increase investment at the point when the market and regulatory environments inflect, accelerate shareholder returns or increase investment in Berkeley Living as appropriate."
The shares plunged over 624p to 2,812p, their lowest since late 2016.
Adding to downside pressure, JP Morgan cut its target price on the stock.
Jefferies analysts said the strategy tweak and "significantly lower" PBT for the four years to the end of the decade reflected changes in macroeconomic assumptions since the start of the Iran conflict, including rises in BoE rate assumptions, lower economic growth.
"However, limiting new land investment and build-work in progress, net cash assumptions could move higher and the question for the FY26 results in June will be the timing and extent of any step up in capital returns."
Market analyst Victoria Scholar at Interactive Investor noted that Berkeley and other housebuilders have been hit hard since the start of the Iran war, as mortgage rates have risen on expectations that interest rate might rise due to inflationary effects from higher oil prices.
"Traders are reacting badly to Berkeley’s update," she said, but added that with the sharp declines from recent highs, "some might argue that certain stocks in the sector are now oversold, presenting some attractive buy the dip opportunities, particularly if there appear to be further signs of de-escalation in the Iran war".
** UPDATE: Adds share price and analyst comment **