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Mass marketing of new London properties to emerging markets bringing prices down

They are targeted at unsophisticated buyers and are bought off plan in what can only be described as a ‘feeding frenzy’, according to property company London Central Portfolio.

And although this method of selling negates the hassles of searching and travel and new builds also offer modernity which local Asian markets associate with high end, there are simply too many of them around, says the firm’s chief executive officer Naomi Heaton.

‘Chronic oversupply of these new builds results in dramatically suppressed yields and suppressing prices. Canary Wharf has seen 30,000 new units developed since 2000, in stark contrast to the 500 or so units a year in Central London. Prices are just one third of those in the heart of the Capital and the units have limited re-sale potential once they are no longer new and the Asian buyer has moved on to the next marketing phenomenon,’ she explained.

She pointed out that excluding prime central London, the average price of a London new build in February stood at £318,981, an 8% premium over older properties. However, average prices of new build properties only grew 0.37% over a year. Older properties in Greater London, on the other hand, have shown a far superior appreciation of 7%, rising from £277,916 to £296,667.

‘Whilst there is clear appetite for brand new properties from less sophisticated new world economies, these investment choices should be entered into with care. Investors are paying a premium for newness, which by implication has built in obsolescence,’ said Heaton.

‘At re-sale, units in big schemes can only compete on price. In the meantime, the rush of identical properties coming on to the market for rental means landlords are all vying for tenants at the same time, with a resultant downward pressure on  rents,’ she added.

Heaton believes that whilst London residential has undoubtedly become a reserve currency for the international elite, investors should be more cautious of where and what they buy. ‘Older properties might need refurbishment, but investors undertaking this can benefit from an immediate uplift in value, rather than paying a premium to a developer. Flats and houses in London’s classical terraces and quaint mews are difficult to find but offer much greater long term potential. They do not come off a production line; they are one offs with their scarcity value underpinning price growth,’ she said.

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