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The Housing Bubble's Great Survivors

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Buying back shares when your stock price is already overvalued is daft because it rewards shareholders who sell at the expense of those who don't. But it might be a little unfair to lump Berkeley Group, the London-focused home-builder.

Instead of just paying a cash dividend, Berkeley said on Friday that it would also consider buying back stock. Total shareholder returns will remain the same. Berkeley Group's shares have suffered more than Persimmon, which doesn't build in the capital.

The shares yield 7.5 percent (based on its target to return 2 pounds a year to shareholders), which would usually suggest a dividend cut is on the way. But there's little reason to think that's the case here. True, reservations have fallen 20 percent, a function of Brexit and taxation changes that discourage home purchases. Yet earnings per share jumped 35 percent in the six months to October 31, thanks in part to higher selling prices -- the average price was 650,000 pounds.

Indeed, Berkeley felt cheerful enough to make a new forecast of at least 3 billion pounds ($3.8 billion) of pretax profit over the next five years, about 50 percent more than it's achieved since 2012. While much has changed since the Brexit vote, London's perennial shortage of homes hasn't. Even if some air's released from the housing bubble, Berkeley won't be feeling too deflated. Bloomberg

 

It sounds like London's luxury apartments are flying off the shelves like never before

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30 minutes ago, rollover said:

 

It sounds like London's luxury apartments are flying off the shelves like never before

Nobody wants to live surrounded by council estates and poor people on benefits. Expensive developments are a natural barrier. I sympathise.

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predicting 50% increase in profit...? Have they made a donation to the Tories recently...? Perhaps policy makers will be able to protect them or more likely the whole farce will run out of their control and be a disaster story for all of us.

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