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Rob Perrins (right), chief executive of Berkeley Group, says red tape has made London effectively uninvestable - Jonathan Brady/Reuters

Building homes in London is becoming impossible because of high taxes and red tape, a major housebuilder has warned.

Berkeley Group said on Wednesday that it was halting new land purchases and reducing investment in its building projects, most of which are in the capital or other urban areas.

The company said the conflict in Iran, which is pushing up costs, and a deteriorating economic outlook contributed to its decision to pull back from the market.

However, Rob Perrins, the chief executive of Berkeley, criticised red tape and taxes that he said risked making London effectively uninvestable.

Berkeley said land prices were becoming “overheated” because it was too easy for other businesses to bid for land. Mr Perrins said that Big Yellow Group, the self-storage giant, is his “biggest competitor at the moment”.

“The Government needs to prioritise housebuilding land and not allow Big Yellow to buy all the land, because London will have no [new] homes, fundamentally, if we carry on as we are,” he said.

“You can’t keep increasing taxation on fewer and fewer houses. We have three types of taxes that are too high – development tax, customer-facing tax and corporate tax, which other land uses don’t get.”

In its update to the market, Berkeley criticised “an unprecedented increase in cost and regulation, at a time of increasing interest rates and faltering consumer confidence, amidst prolonged geopolitical and macro-economic volatility and uncertainty”.

Mr Perrins criticised the building safety levy, a tax aimed at funding cladding remediation work and the community infrastructure levy, a charge that councils use to fund infrastructure such as schools and health services.

He said: “The building safety levy should be dropped. We already pay a residential property developer tax of 4pc. Our corporation tax is [effectively] 29pc. We’ve got all the employee taxes.

“There’s a huge amount of what I call customer-facing taxes [such as] stamp duty, and then there’s a huge amount of development tax.

“The Government is not focusing and prioritising affordable housing, [but] focusing on tax-raising measures like the Community Infrastructure Levy.”

Building safety planning rules had added around a year to the time taken to gain planning approval and begin construction on projects, Berkeley said.

Mr Perrins said the quagmire in London meant Labour’s manifesto pledge to build 1.5 million homes by the end of this parliament was looking increasingly far-fetched.

Underpinning that ambition is the Mayor of London’s target to build 88,000 homes a year in the capital.

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Mr Perrins said: “If London has a requirement for 88,000 homes, and we’re building 10pc of those, it probably sums up how difficult it is for the Government to hit its target. It just puts it in complete context.”

Steve Reed, the Housing Secretary and Sir Sadiq Khan, the Mayor of London, unveiled an emergency package to boost housebuilding in the capital in October. Reforms include cutting the proportion of affordable homes required for a site from 35pc to 20pc.

Mr Perrins said the temporary measures were to be “applauded”, but warned their success would depend entirely on how “forward-thinking” each borough is.

“My worry is, if boroughs don’t want to follow the messaging, it will not change behaviours on the ground,” he said.

“From a policy point of view, I can’t fault [the measures] … but if local authorities won’t implement them, then it will not translate into new houses quickly.”

He pointed to recent efforts to build 586 homes in Kingston, which were refused by the council after five years of negotiations.

Mr Perrins said the Government needed to consider more measures, such as reducing taxes and regulation on builders, and bringing in demand stimulus through Help to Buy-style schemes for buyers and stamp duty reductions.

Shares in Berkeley plummeted by nearly 18pc on Wednesday morning, marking the steepest fall in a decade.

The housebuilder cut its profit forecasts following the update. It now expects to generate £1.4bn of pre-tax profit in the four years between 2027 and 2030, roughly equivalent to £350m a year.

Anthony Codling of RBC Capital Markets said the new forecast was around a third lower than previous estimates.

Berkeley said it would redirect its focus to developing its existing land holdings and buying plots through joint-venture agreements, rather than on its own.

Its existing land holdings consist of sites for more than 50,000 homes, with a further pipeline of more than 10,000 in London and the South East.

Aynsley Lammin of Investec said London was the “most difficult area” in the UK for housebuilding and said Berkeley’s decisions were “reflective of the difficult situations” builders face in the capital.

“The affordability constraints are greater. If you’re a first-time buyer, just the hurdle to raise a deposit to get the mortgage is that much more difficult in London,” he said.

Data published by Nationwide last week showed the average first-time buyer must put down a deposit of £44,800 for a home, well above the national average of £23,000.

Mr Lammin said: “Investor appetite has waned as well, particularly from overseas investors, with all of the regulations on investment properties, buy-to-let - that’s been a big factor for Berkeley Group. London was more of an investor market and that’s become very difficult.

“Developers also face more regulatory and cost burdens in London… Some of it is obviously economy-wide, but it’s concentrated and magnified in London. Everything just becomes that much more difficult.”

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