New London home construction sinks to lowest since 2009
THE construction of new homes in London has frozen, as high interest rates and sticky inflation batter sentiment among the city’s housebuilders.
Fewer than 1,500 new homes went under construction between July and September, according to data compiled by Molior London and seen by Bloomberg News. That’s lower than any quarter since 2009, and more than a 60 per cent drop from the second quarter of this year.
“If construction starts are the barometer of developer sentiment, then London’s housebuilders are under a distinctly cold front,” the report’s authors said. “One respected niche developer used the word ‘tumbleweed’ when describing the UK market response to recent advertising.”
The data – which is calculated based on transactions for projects with at least 20 units – spells out the misery facing London’s housing market as pricey borrowing wreaks havoc on demand. UK homebuilder Bellway said on Tuesday (Oct 17) it was targeting completions of around 7,500 homes in the current financial year, compared with almost 11,000 in the previous one.
Sales of newly built properties in London have also taken a beating, according to Molior. Excluding deals in the build-to-rent sector – a strategy often used by developers to boost revenue in a period of low sales – just 1,890 units sold between July and September, the lowest quarterly figure since the start of 2010.
Molior said over half of those sales in London’s top-selling developments were to foreign buyers, a group the Labour Party wants to raise stamp duty for if they win the next general election. Large overseas sales volumes are driven by low pricing, Molior said, with one “top-selling project” in the city setting asking prices at around 30 per cent cheaper than a rival development less than 500 meters away.
Construction completions are more than a third lower than the 10-year average, with 65 schemes stalled across the capital. Those part-built projects – which are often put on ice due to builders falling into administration – compare to only 10 stalled developments in 2009.
Still, Molior said the homebuilding sector was performing better than in 2009, with over 50,000 private units currently under construction compared with 16,800 at the end of that year. More than half of the units currently being developed are sold, compared with 39 per cent in 2009.
“Despite such tough conditions, the industry as a whole is in relatively good shape compared with the end of 2009,” the report’s authors added. “This time around the industry is well funded, better organised and has the advantage of a robust lettings market.” BLOOMBERG
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