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Interest from buyers in inner London new developments waning
A new analysis suggests that while there has been an increase in development in London the new homes are concentrated in a handful of areas and some are so pricey that interest from buyers is waning. The result is a deepening new build crisis in inner London in particular and the lack of interest in new builds is seeing prices fall. The report from London Central Portfolio shows that overall the number of new developments approved for construction has surged this year, with a substantial 20% increase in the planning pipeline since 2013, representing 106,208 new units. However, this pipeline is largely made up of projects in cluster areas around Tower Hamlets and south of the river in the Battersea-Nine Elms area where there is already a proliferation of new developments. This year, a further 33,239 and 18,665 units respectively are now scheduled to be built. New applications have also rocketed. Applications for 17,494 new units including 111 towers, buildings over 20 storeys, have been submitted, a 27% increase on 2013. This is equivalent to one new tower application every three days, of which 90% are located in Tower Hamlets and Wandsworth’s Battersea-Nine Elms development. Despite the ever increasing number of new developments, however, statistics have shown that the attraction of these new properties, where prices now average £914,532, is waning. According to LCP’s analysis of the Government’s Land Registry data, only 1,491 new units have been sold so far this year, a substantial 43% decrease on this time in 2015. This compares with older properties in inner London where transactions have remained static, 13,194 in 2016 compared with 13,190 over the same period last year. The analysis also shows that square foot prices have also fallen for new properties. Across the Battersea-Nine Elms stretch, for example, prices are down 8% on their 2014 high. This is in stark contrast to London as a whole where prices are up 23%. New build sales volumes are also significantly down, decreasing 43% on the same period last year but the prime central London market remains largely protected, due to its limited new build potential. Sales activity has been normal in the first half of this year ‘In light of the plethora of tax hits over the last few years, possibly exacerbated by the uncertainty of Brexit, it appears foreign investors, the majority buyer of new developments, may finally be turning away,’ said Naomi Heaton, chief executive of LCP. ‘These properties typically sell at a significant premium, averaging 25%, over older stock. History demonstrates that a saturation of overpriced commodity style property leads to softening prices, particularly during times of economic uncertainty,’ she explained. ‘In Tower Hamlets, for example, which undertook an extensive building programme before the Global Financial Crisis (GFC), prices took six years to reach parity with their pre-recession level. In contrast in prime central London, where there is very limited new build due to the conservation of… Continue reading
Hong Kong residential sales fell by 8% month on month in July
The volume of residential sales in Hong Kong fell 8% month on month in July after three months of growth in a row, the latest figures from the Land Registry show. Overall property prices remained stable and this was due to sustainable end user demand, according to the analysis in the latest monthly report from international real estate firm Knight Frank. It explains that the new build market, which contributed to about one third of total residential transactions in Hong Kong, is where major developers generated good sales in their recently launched projects. For example, Park Yoho Venezia in Yuen Long has sold 95% of its 62 units in its third batch of sales in July and The Ascent in Cheung Sha Wan was oversubscribed seven times and sold over 94% of its first batch of 125 units in one day. There have been some transactions in the otherwise muted land market. In one notable sale, a domestic site in Pak Shek Kok, Tai Po was sold at an accommodation value of HK$3,932 per square foot, up 19.2% from two years ago when the adjacent site was sold. However, the report points out that despite the recent pickup in sales, the surge in upcoming supply is expected to suppress growth in home prices. According to the latest data from the Transport and Housing Bureau, 93,000 new homes are to be provided in the coming three to four years. ‘Developers are expected to continue offering deep discounts and competitive mortgage schemes to attract buyers in order to offload inventory before a possible US interest rate hike in the coming months,’ the report says. ‘We maintain our forecast of luxury home prices falling 5% to 10% this year and mass residential prices dropping up to 10% over the year,’ it adds. The report also says that the Grade A office market in Hong Kong remained subdued in July as many large financial institutions continued to downsize which had a negative effect on leasing demand. This means that medium sized firms are using it as an opportunity to take up space released by multinational corporations and Knight Frank expects this trend to continue. By the end of the year Knight Frank expects central office rents to increase but in decentralised areas, such as Kowloon East, there is likely to be rental pressure due to increasing upcoming supply. Continue reading
Majority of UK buyers and renters would pay more for ideal home
Millions of buyers in the UK would pay more than they intended for the right home with 62% willing to go over their budget by 10%. Overall 43 million, 78%, would pay more and 62% would spend up to 10% more for their ideal property with those in London, Scotland and Northern Ireland most willing to do so. The 31 million willing to go over budget by up to 10% would find themselves paying some £28,000 more for a home or £912 more per year if renting, according to the research from Ocean Finance. Only one in four would not go over budget at all and 2% of people would be willing to go more than 20% over budget, adding a minimum of £56,000 onto the original purchase budget or £156 per month, £1,872 annually, onto rental payments. A breakdown of the figures show that 34% are willing to go up to 5% over budget, 28% 6% to 10%, some 7% would go 11% to 15% over their initial budget, 4% 16% to 20% and 1% 21% to 25% over. In Scotland and Northern Ireland some 79% are willing to pay more for their ideal home while 77% in London are also willing to do so. The research also shows that it is buyers under the age of 34 who are most willing to stretch their finances with 80% of young people saying they would increase their budget for the right home. ‘Whether we are renting or buying a property most of us have a budget that we can afford in mind. But three quarters of us are happy to ignore the budget and stretch our finances to get the home that ticks all our boxes,’ said Ian Williams, Ocean Finance spokesperson. Continue reading
