Unsold New London Luxury-Home Glut to Reach Record on Oversupplyby
Completed unsold homes more than double since start of 2015
Inner London home starts are still too high, Molior says
The number of unsold central-London homes under construction will reach a record high this year, increasing the risk that developers’ bets on rising demand for luxury properties will go sour.
Homes being built without a buyer secured will reach 10,829, a 24 percent rise from the end of last year, according to a report by Molior London seen by Bloomberg News. That’s the highest figure since the researcher started collating the data in 2009. The number of completed unsold homes will jump to 779 from 285, the data shows. A spokesman for Molior declined to comment.
“Over time, the number of units started should be equal to the number of units sold,” according to the report. “Inner London home starts have been, and still are, too high.”
Developers have begun construction on more new homes than they have sold each year since 2012, according to the report, resulting in a glut that could cause prices to fall. The market has been grinding to a halt as concerns about the economy following the Brexit vote and rising property taxes deter buyers.
The average asking price for new homes in central London is more than 1,000 pounds ($1,242) a square foot. It will take more than 2.3 years to sell the homes under construction based on the current sales rate, according to the report. That compares with 1.25 years at the end of 2015.
Westminster has the most expensive new homes at 2,074 pounds a square foot, followed by the City of London at 1,603 pounds and Kensington and Chelsea at 1,451 pounds, the data shows.
“A glut of inappropriate residential stock has been bubbling for some time now across prime central London,” said Faisal Durrani, head of research at broker Cluttons LLP. “An unfortunate combination of domestic and global events has accelerated a market-wide slowdown that has been under way for almost 18 months now.”
Luxury home prices have been dropping across the market. Values in Chelsea and Knightsbridge fell 9.9 percent and 5.6 percent respectively in the year through October, according to broker Knight Frank LLP. To the north of Hyde Park they were 8.2 percent lower.
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