Developers in London continued to operate in an uncertain environment during the second half of 2019, with Brexit still unresolved, a new Prime Minister, and a challenging planning environment, says a new analysis.
Despite this, developers of all types have continued to seek opportunities, and a lack of sites available to purchase has halted the decline in land values in central London, according to the latest London residential report from real estate firm Knight Frank.
It says that demand has been supported by a variety of factors as house builders in outer London have continued to see positive sales volumes, aided by Help to Buy, and resilience at the top end of the central London market points to a shortage of super prime new homes in years to come.
However, sales, including existing homes, were down 8% year on year in the 12 months to March, though there is variation among price bands, with volumes between £500,000 and £1 million proving more resilient. The report says that suppressed activity has weighed on house prices, which dipped 1.4% in the year to July.
Pressure on pricing remains greatest in prime central London, where Knight Frank data indicates prices declined 4.4% during the year to August, though the rate of decline across the capital is slowing.
The number of new prospective buyers registering with Knight Frank rose 29% in prime central London in the year to July 2019. Meanwhile, the number of new listings above £1 million declined by 25% over the same period. It is this imbalance has contributed to a moderation in annual price declines.
The report suggests that medium term future of housing activity in London will continue to depend on the planning environment, and what happens politically between now and October 31 when the UK is scheduled to leave the European Union, but the data suggests developers of all types are planning for the long term.
The report also reveals that super prime new homes sales in London have remained resilient despite a wider slowdown in the central London market. Approximately 30 to 35 new homes are sold for more than £10 million every 12 months, a figure that has remained steady for almost two years.
As sales of existing super prime homes have slowed this year, new home sales have gained a greater market share, from 18% in the second quarter of 2017 to 34% at the end of the second quarter.
This is, in part, because there have been more units available to buy, following a 2016 peak in completions in Kensington and Chelsea and Westminster of 1,087, which dipped slightly to 1,001 in 2017 before almost halving to 540 in 2018.
However, it is also about a shift in buyer tastes, according to Rupert des Forges, head of prime central London developments at Knight Frank. ‘Prime buyers are increasingly focussed on securing a London residence in a new scheme and typically they prioritise a high level of security and extensive amenities,’ he said.
‘Prime apartments offer a seamless move away from transient hotel living for the new generation of global wealth now driving the top end of the London market,’ he explained, adding that several high profile schemes have sold out in recent months, and the current planning pipeline points to constrained supply on the horizon.
