The money's on the street

The latest statistic from Berkeley, whose core business is still the building of upmarket flats in central London, suggests that we're all getting richer. Last year, 70% of its buyers said that they had no need for a mortgage.

Emphasising this affluence, Tony Pidgley, managing director and founder of the company, said last week: "Thirty years ago we had to arrange mortgages for virtually all our buyers." Investors now account for 51% of properties sold by Berkeley in London.

Berkeley Group's latest annual results (12 months to 30 April 2002) show that the urban regenerator and residential property developer achieved a pre-tax profit of £196m (£169m) on a turnover of £980m (£830m). The number of units sold rose to 3,200 (2,400).

Pidgley said that property is increasingly seen as a safe haven. "People don't trust the stockmarket and I don't think they're happy about either pensions or ISAs, but they are comfortable buying property.

"Prices are about confidence and the feel-good factor. As long as people feel that their jobs are safe, that's the main thing - press headlines are not the issue. I don't see a major crash but I'd like to see the heat come out of the market."

Affected by the stockmarket turmoil and disillusioned with the prospects for pensions, London prices are reported to have been pushed too far by an upsurge of new buy-to-let players. However, Pidgley said the individuals entering the buy-to-let market on a small scale are having little influence on prices.

On the other hand, large-scale investors are important to market stability, he said. Such buyers account for 51% of Berkeley's sales within London, with foreign investors taking a fifth of this total.

"Most investors have been here for a long time," said Pidgley. "We have been selling to an Israeli consortium for 10 years, for example, while the Irish have been big buyers, families with a surplus of cash. A lot of people simply want a second home in London, while others are buying for their grandchildren. Buy-to-let is not the danger."

Berkeley sold more than 30 properties for over £1m, with finance director Rob Perrins adding that its top-of-the-range houses in Kensington, priced at £5m, are selling well.

Adopting a new accounting standard (FRS 19) ate a modest £9m hole into pre-tax profit which would otherwise have topped the £200m mark. "The world has moved on," said Pidgley before stressing: "We are not at the dodgy end. We have no black holes.

"This is just a change in the revenue recognition date. Our business has changed: when we built two-storey houses we took a profit on exchange, but you can't take that policy to a group that undertakes 20-storey developments. We'd been looking at making this switch for 12 months."

The average selling price was £273,000 (£285,000), the fall being the result of differences in housing type.

Pidgley said: "Reservations during the first five months of 2002 have been at record levels and we have continued our policy of selling homes off plan at an early stage in the development process." Over 400 units have already been sold that won't be delivered for two years. Pidgley hoped that the buyers would be rewarded by value increases in the meantime.