UPDATE 2-Berkeley's bumper 1 bln pound payout gives UK housebuilders a lift

* Berkely to return 500 mln pounds in 2020 and 2021

* Says 20 new sites have begun construction

* UK house prices rose more that 1% in December

* Shares up 5.7%
(Adds analyst comment, shares)

By Noor Zainab Hussain

Jan 22 (Reuters) - Housebuilder Berkeley plans to
more than double investor returns to 1 billion pounds ($1.3
billion) over the next two years while ramping up output,
signalling increased confidence in the UK market and lifting its
shares more than 5%.

British house prices, which weakened with the rest of the
economy after the 2016 Brexit referendum, last month rose more
than 1% in annual terms for the first time in 12 months,
according to mortgage lender Nationwide.

However, it also said that continuing uncertainty over the
UK's departure from the European Union is likely to weigh on the
market again this year.

Referring to Berkeley's investor payout pledge, broker Peel
Hunt said the confidence to return this additional cash comes
from the company's 20 long-term sites now in construction as
well as the recent UK election result, which strengthened the
government of Brexiteer leader Boris Johnson.

Shares in Berkeley rose 5.7% to 5,472 pence by 0834 GMT,
leading London's blue-chip index and also lifting rivals
Persimmon, Barratt Development and Taylor
Wimpey.

Berkeley, which operates primarily in London, Birmingham and
southern England, said that about 500 million pounds will be
returned to shareholders in March 2020 and a further 500 million
pounds a year later.

Beyond that, the company said it intends to make annual
returns of 280 million pounds in half-yearly instalments of 140
million pounds through share buybacks or dividends.

The company, which undertakes major brownfield regeneration
projects in London and the South East, said it has bought a
number of sites since the end of the financial crisis and a
number of these are now in or beginning production.

Berkeley is in the process of bringing forward 25 large
residential-led developments and has begun construction on 20
new sites over the past 18 months, it added.

These sites typically deliver between 1,000 and 5,000 homes
and their development can take up to 30 years to complete.

"Since 2016 ... Berkeley has been mindful of the volatile
operating environment and has been cautious in its investment,"
the company said.

"In light of the progress made in bringing forward its new
sites, and its assessment of the prevailing operating
environment ... Berkeley has reviewed its net cash position and
future requirements."

The company said it has increased its net cash position to
more than 1 billion pounds from 107.5 million pounds since 2016.

"The right way to think about today's surprise announcement
is that this represents the return of a precautionary cushion
that is no longer required and it does also signal improved
confidence in the market," said Liberum analyst Charlie
Campbell.
($1 = 0.7664 pounds)

(Reporting by Noor Zainab Hussain in Bengaluru
Editing by David Goodman)