London new home sales pick up on investor demand for rentals

London

SALES of new London homes picked up in the second quarter, driven by resurgent investor interest in the rental housing sector.

Transactions rose 6 per cent from the same period last year to 4,196, showed data compiled by Molior London and seen by Bloomberg. The increase followed a dire start to the year, when the capital suffered its worst quarter for home sales since 2012.

The data is based on projects with at least 20 units, which tend to be apartment blocks.

"London's private residential development industry has delivered a significantly better set of figures," the researcher said in a draft of the report.

"The turnaround in the numbers principally comes from one source: a welcome return of the build-to-rent sector to the forefront of industry activity."

Investors are increasingly betting that London's housing shortage and sky-high home values will push more residents to the rental market.

Purpose-built rental housing is one of the few areas where construction is picking up, accounting for almost a third of new homes starting work in Q2, said the report. That compares with 12 per cent in Q1.

Central London rents spiked the most on record in June as more tenants returned to the capital.

But the cost of leasing a home is still down 16.5 per cent from a year earlier, and broker Hamptons International predicts it will take 12 months for prices to return to pre-pandemic levels.

London housing has lagged behind the nationwide boom as buyers seek more space and greenery in suburbs outside of the capital.

The question for landlords and developers is whether that trend will continue as lockdown measures are lifted next week and the Covid-19 pandemic has less influence on Londoners' lifestyle choices.

The construction of new homes has also trailed behind the rest of the country, with more built in England in Q1 than in the past 20 years.

Some 81 per cent of new builds in the year through March were houses, reflecting the unpopularity of apartments during the pandemic and the challenges facing London-based developers. BLOOMBERG