UK housebuilder Berkeley has warned market conditions in London and the South East are obstructing efforts to build new homes.

In a trading update, the Group said a number of factors affecting the housebuilding market means Berkeley is "currently unable to increase production beyond the business plan levels".

"The market conditions in London and the South East are unchanged from the first half with home movers and downsizers continuing to be constrained by high transaction costs, the 4.5x income multiple limit on mortgage borrowing and prevailing economic uncertainty," the Group said.

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"In addition, domestic buy-to-let investors, who buy early in the cycle and provide security of cash flow to enable complex, capital intensive developments to be brought forward, are further impacted by additional transaction costs and the removal of interest deductibility.

"These factors, together with the changing planning environment and the time and complexity of getting on site following planning approval, mean that Berkeley is currently unable to increase production beyond the business plan levels."

Despite these issues, the company said it expects forward sales above £2 billion at 30 April 2018, along with £3.3bn of pre-tax profits for the five year period from 1 May 2016 to 30 April 2021, and £1.5bn pre-tax profit to be delivered in the two years ending 30 April 2019.

(LM/MH)