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London developers finding most expensive apartments hard to sell
[LONDON] London developers, who are building a record number of new homes in the capital, are finding it harder to attract buyers for the most expensive properties before a sales- tax increase for landlords and second-home buyers in April.
Sales at the second phase of Capital & Counties Properties Plc's Lillie Square project in the Earls Court district, where a two-bedroom apartment can cost 1.7 million pounds (US$2.4 million), have not risen since November, the company said on Wednesday.
"The challenging conditions seen in the residential market at the end of the year are expected to continue in 2016," the developer's Chief Executive Officer, Ian Hawksworth, said in a statement on Wednesday. Shares in the company fell as much as 5.4 per cent to the lowest since October 2014 and were trading at 325 pence at 2:25 pm in London.
The stamp duty sales tax will climb to as much as 15 per cent of the costliest homes for landlords and second-home owners. It will add 90,000 pounds to the levy on a 3 million- pound apartment and the higher charge follows an increase for all buyers of luxury homes in 2014. Demand for London homes under construction slumped by 19 per cent in the fourth quarter as prices and global market turmoil helped damped demand.
"We are concerned by the significantly slower sales-rates at Earls Court," James Carswell, an analyst at broker Peel Hunt with a reduce rating on the stock, said in a note to clients. "This is despite numerous advertisements offering to pay stamp duty on behalf of the buyer and, although prices have held up so far, we remain cautious." In south London's Nine Elms, the district that includes Battersea Power Station, there is "a messy shoot-out between competing developers" for buyers in a neighborhood where 18,000 homes are planned, according to Mike Prew, an analyst at Jefferies Group LLC.
Tax increases hurt sales in the latest phase of the Battersea Power Station, according to Sime Darby Group, which owns 40 per cent of the project. While 53 per cent of homes in phase 3a have been sold, those priced above 1.5 million pounds remain on the market, the Malaysian company's Chief Executive Officer Mohd Bakke Salleh said on Wednesday.
Buyers from Russian and China are purchasing fewer apartments in London, Bakke said.
Barratt Developments Plc sold homes at a project in Horseferry Road in the Pimlico district at a rate of two to three a week in 2014, Chief Executive Officer David Thomas said by phone on Wednesday. In a new project opposite that development, sales are running at less than one a week, he said.
"We are still seeing transactions at a higher price point but it is definitely at a slower rate of sale," Thomas said.
The number of homes under construction in London rose by more than a third during 2015 to a record 60,300, according to data compiled by researcher Molior London Ltd.