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London's tide of unsold homes starts to recede from record high

Sharp slowdown in project starts helps to offset declining sales

London

THE number of unsold homes under construction in London declined from its peak in March as a sharp slowdown in project starts outweighed the impact of falling sales.

There were 30,600 homes being built in the capital that had yet to find a buyer at the end of June, down from the record of 31,508, according to a report produced by Molior London.

The decrease resulted largely from a 41.4 per cent drop in new construction projects compared with the average for 2018, the data showed. That decline more than offset a fall of about 10 per cent in quarterly sales.

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"Many in the industry were expecting a very difficult 2019," according to the report. "While the year to date certainly has not been easy, developer pragmatism and resourcefulness seem to have fended off the worst outcomes."

London's new-home market has been beset by tax hikes, unaffordable prices and Brexit uncertainty that have led to a gradual pile-up of unsold properties.

While the mountain of available property may have peaked, the scale of the city's building boom means it would still take 3.7 years to sell the unsold homes in the city's central zone one district alone, up from 2.7 years at the end of last year.

The government's Help to Buy low-cost loan programme helped support about 35 per cent of sales in the quarter, while sales to large-scale rental investors made up 18 per cent, Molior's data showed.

Average prices across London were about £900 (S$1,1,530) per square foot, however, the "figure should be treated with extreme caution" as discounts of 5 per cent to 10 per cent are common, the report said.

"We have heard of cases where discounts as high as 30 per cent have been applied to shift the last penthouses in some Central London" projects, according to the statement. BLOOMBERG