Record-low new home inventory in London’s real estate market led to sky-rocketing sales to close out 2009, and supply shortfalls should keep prices rising for land in 2010. Meeting the needs of a changing market will challenge developers, as the proportion of investor to owner occupier purchases has flipped – with the latter now the majority. See the following article from Property Wire to learn more on this.
Sales of newly built houses in London rose by a staggering 214% in the final quarter of 2009 compared with the same period a year before, according to a new report.
Growth in the sector was considerably higher than the average increase of 68% for the entire London property market including re-sales, the Knight Frank London Residential Development 2010 review shows.
Liam Bailey, head of residential research at Knight Frank said it was due to lack of supply as the number of new homes for sale across London hit an all time low of just 975 in the third quarter of the year. The current supply of stock available to buy is down by 20% compared with the first quarter of 2009.
‘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,’ explained Bailey.
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, the report also shows.
‘However for developers, the improvement in pricing has been felt more by the evaporation of discounting rather than headline price growth,’ said Bailey.
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. ‘The successful schemes will be those that create environments in which people want to live,’ he added.
But investors have not disappeared altogether and still account for a third of buyers and 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 and 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,’ continued Bailey.
The review also shows that since the second half of 2009, the London’s super prime 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.
The London land market has also seen a dramatic turnaround as after sharp falls for 12 months, land values 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. Our view is that Land prices in London are likely to keep climbing through 2010,’ Bailey explained.
The report says that Stratford is one place which will see substantial progress leading up to the Olympic Games but it could be many years before the rest of the Thames Gateway catches up.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.