Developers struggling to meet demand for luxury homes in London
The number of luxury homes currently being planned or under construction in London hit a record high this year, with around £60 billion of properties currently due to be delivered over the next decade.
This is a 20% increase on 2013. However, with significant capacity issues at every level of the capital’s construction industry, a huge proportion of these properties are unlikely to be built on time, according to a new report from EC Harris.
It reveals that this year, the capital’s 10 year pipeline of high end property has grown by around a quarter to a record 25,000 homes. However, with developers and investors struggling to keep pace with seemingly insatiable buyer demand, up to half the new homes planned in the next five years could end up falling well behind schedule due to a lack of available contractors to deliver the required quality of work.
‘With the UK economy back on track and London deemed a safe haven for international property investors, it’s not surprising that demand for luxury homes is fuelling ever increasing development,’ said Mark Farmer, EC Harris head of residential.
‘Where we are starting to observe real problems, though, is in the construction process. There is simply not the capacity out there to meet demand and many projects will undoubtedly fall by the wayside or experience delivery difficulties due to sheer lack of resources,’ he explained.
‘Many developers and investors, when in a position to do so, are therefore looking to jump the queue and are paying premiums for construction so they can deliver on promises they have already made to their purchasers,’ he added.
In terms of location, the South Bank is proving the most popular area of the capital for development, accounting for around a third of new projects. This is closely followed by Chelsea and Fulham and the City.
The report points out that the appetite for high end residential property continues to reach well beyond the traditional West End heartland, with high profile developments such as One Blackfriars and Bishopsgate’s Heron Plaza demonstrating the spread into a much broader swathe of central London.
Therefore, to avoid losing out on investment returns in the current strong sales market, some developers are being forced to pay premiums to contractors in order to secure their services.
It concludes that this rush to market has provoked significant price inflation in the construction sector as developers seek to urgently get building work underway with the best available tradesmen and project delivery expertise.
