Home » New Homes » New build sales volumes increase more than 200%

New build sales volumes increase more than 200%

"Factors such as interest rates remaining low, the weak pound stimulating international interest and Government-supported schemes targeting the new-build sector and first-time buyers in particular have all contributed to this strengthening market.

"While the recovery in prices in the new-build sector is not quite at the level seen across the central London market as a whole, there has been evidence of price growth on some schemes in recent months, for example Embassy Court in St John’s Wood. However for developers, the improvement in pricing has been felt more by the evaporation of discounting rather than headline price growth.

"One of the most notable changes in the new-build market has been the shift in balance of investors to owner occupier numbers buying new homes. While the ratio used to be 30:70 owner occupiers to investors, it is now 70:30 owner occupiers to investors. The change is slowly influencing developments as buyers looking for themselves are more interested in property layout and specification. Still, while we would love to think the return of the owner occupier signifies the emergence of larger flats for buyers outside of the super-prime market, affordability still provides an effective brake on the aspiration of buyers. Evidence from Knight Frank’s applicant data confirms subtle changes to requirements, with a noticeable rise in demand for larger units across prime central London markets. The successful schemes will be those that create environments in which people want to live.

"The key thing though is that the investor has not disappeared altogether and still accounts for a third of buyers. Off-plan sales have returned. The opportunity for overseas investors as a result of the weak pound cannot be underestimated. Far Eastern buyers, especially those from Hong Kong, Singapore and Malaysia have been back in force over the past 12 months but they are far more shrewd. Armed with Google Map’s Street View and nethouseprice.com for example, these investors have more tools at their disposal to ensure they buy into only the very best schemes. This is good news as it means future development cannot afford to cut back on quality. Hopefully future competition between central London developers will be fought out over quality not simply price.

"London’s super-prime development market was the last to catch a cold during the recent recession. Now with prices surging by over 20% in the 12 months to February 2010, developers are eyeing this market with renewed interest. Since the second half of 2009, this specialised market has bounced back. While sales dipped in 2008 the number of purchasers looking to buy super-prime properties barely changed and there remains a good level of demand. With planned and potential launches of One Hyde Park, Cornwall Terrace, The Lancaster’s and NEO Bankside, the availability of prime new-build stock will rise during 2010 and 2011. The nature of this market is that it will often form part of a wider global property portfolio.

"In line with the sales market, the London land market has also seen a dramatic turnaround. After sharp falls for 12 months, land values subsequently rose by 9% on average across London in the second half of 2009 as competition for sites stiffened. However persuading landowners to sell has been difficult as land values are still substantially lower than they were at the peak resulting in limited supply. This shortage of available land means that developers are having to work with their existing land banks as much as possible and get the best possible outcome out of these. Renegotiating planning terms, especially when it comes to affordable housing quotas is the order of the day. Our view is that Land prices in London are likely to keep climbing through 2010.”

"Development pipeline is a concern. East London has a 55% share of future developments – 72,212 units out of a total 131,414 units, but the map in our review shows these have not been started yet. While these numbers look impressive the ability of developers to actually deliver these will be constrained by the lack of available finance for new projects."

Have your say on this story using the comment section below