LONDON: Luxury home developers plan to build more than 20,000 properties in London over the next decade, ramping up the pace of construction even as price gains slow, consulting firm EC Harris LLP said.

The 10-year development pipeline stood at 15,000 a year earlier, EC Harris said yesterday in a statement. There’s been a 55% increase in the number of homes planned for the lower end of the luxury market, mainly on the edges of neighbourhoods like Mayfair and Knightsbridge.

South Asian buyers account for two-thirds of new London homes sold before completion, according to Land Securities Group plc, the largest UK real estate investment trust. There is a risk that those investors will grow weary of repeated sales exhibitions promoting London property, Mark Farmer, head of residential at EC Harris, said in the report.

“Pre-sales are happening in a much more crowded market and there are increasing challenges for developers and investors which are resulting from this,” Farmer said. “We are seeing a critical juncture in the market, especially at the lower end of the prime range where it can no longer be given that you should spend more to make more,” he added.

A row of multi-storey luxury terraced houses in London. Luxury home developers plan to build more than 20,000 properties in London over the next decade.

Luxury home values in central London rose 6.8% in October from a year earlier, the slowest in about four years, according to London-based broker Knight Frank LLP.

Developers now expect to construct London homes worth more than £50 billion (RM261 billion) over the decade, EC Harris said. Oversupply is unlikely in the luxury market because construction rarely happens if companies don’t achieve their pre-sales targets. However, profit margins may be squeezed by rising building costs, the firm said.

EC Harris, based in London, defines luxury homes as those that will sell for £1,250 a sq ft or more. That’s up from £1,100 last year.
— Bloomberg

 


This article first appeared in The Edge Financial Daily, on November 25, 2013.

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