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Berkeley Group Holdings Plc saw profit plunge as the U.K. housebuilder contends with a protracted price slump in London’s luxury market.

Profit before tax fell to 276.7 million pounds ($364 million) in the six months through October, down 31% from the year-earlier period, according to a company statement on Friday. The drop probably won’t come as a big surprise to investors, since Berkeley has said it expects pre-tax profit for the full year to drop by about a third.

Prices for homes in London’s toniest areas fell 3.4% in the 12 months through September, driven lower by higher taxes on property sales and political uncertainty, according to broker Knight Frank. Berkeley’s focus on the capital and southeast England leave it more vulnerable to these declines than some other builders.

Berkeley sold 1,389 new homes in London and the southeast at an average price of 644,000 pounds, down from 740,000 pounds the year before.

Berkeley could see trading improve in the near term, but the market is looking for a boost of about 15% in earnings, which is at the “upper end of likely outcomes,” Liberum analysts Charlie Campbell and Marcus Cole wrote in a Dec. 5 note. As a result, they downgraded Berkeley to sell from hold.

“Affordability remains stretched in the south, so volumes are more likely to recover than prices, and earnings are much less geared to volume than price,” the analysts wrote.

To contact the reporter on this story: Lucca de Paoli in London at gdepaoli1@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Patrick Henry

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