British homebuilders including Barratt Developments Plc, Taylor Wimpey Plc and Telford Homes Plc agreed to stop giving buyers living abroad the first chance to buy London homes sold before they’re built.
Eleven homebuilders said they would offer new homes to U.K. residents and foreigners at the same time, the Home Builders Federation said in an e-mailed statement today. The companies typically pre-sell homes to foreigners to get financing to begin construction.
Investors from the Middle East to Asia have been splurging on London homes, buying everything from multimillion-pound mansions in the capital’s best neighborhoods to apartments in Battersea and the City of London. That’s driving prices beyond the reach of many local residents and sparking a development surge that’s increasingly dependent on non-U.K. investors buying homes before they’re completed.
“It is important that homes are not exclusively marketed abroad before the U.K.,” Mayor of London Boris Johnson said in the statement. “I welcome the Home Builders Federation efforts to get developers to sign a code of practice to ensure domestic buyers are not disadvantaged.”
In central London, about 28 percent of home buyers in the two years to June didn’t live in the U.K., according to broker Knight Frank LLP. That rises to about 49 percent for new homes. In Greater London, 10 percent to 15 percent of new homes are bought by non-residents, Knight Frank estimated in October.
South Asian buyers account for two-thirds of new London homes sold before completion, according to Land Securities Group Plc, the largest U.K. real estate investment trust. Developers typically need to sell 30 percent to 40 percent of larger apartment projects before banks will provide credit for construction, according to Mark Farmer, head of residential at EC Harris.
Redrow Plc and Crest Nicholson Holdings Plc are among the developers that signed the agreement.