Advertisement

London house prices: more problems in the new-build sector

The London new-build property sector is facing big problems, says Merryn Somerset Webb. We’ll soon be seeing real price falls.

160202-london-property
New-build properties in Nine Elms real price falls are sure to come

There has been a huge response to my article on London house prices from last week. MoneyWeek readers seems to be genuinely split on this one. Half think that London is so fabulous and so much in demand that prices can't ever fall much or for long. The other half are totally convinced that a crash is on the way.

Advertisement - Article continues below

However, for me the most interesting of the comments on the matter come from those with some knowledge of the new-build sector in London.

I hear constantly that too much is coming on too fast (this round of supply will peak later this year) and that sales (both first and second hand) are running into trouble at a good number of new developments.

Reader John D thinks he sees the same thing: don't forget about all the foreign off-plan purchasers, he says. "When the flats are finished they will have to pay the bulk of the purchase price. With the collapse of emerging currencies that final payment will be much higher than they expected." So they'll be selling up before they have to pay the balance of the price.

Another reader tells us he has already seen that happening with flats in the tower at Saffron Square. The number of off-plan resales he says is already "staggering".

Advertisement - Article continues below

The Sunday Times picked up this story at the weekend. Cross the river from Pimlico to south London, turn on to Nine Elms Lane and you will "find yourself in a mile long building site", says Oliver Shah in the paper. What you won't find is very many people.

Five years ago, Nine Elms or "Singapore on Thames" as Charlie Ellingworth of Property Vision calls it was held up as "the brightest spot in London's construction boom". Now its 18,000 homes and two new tube stations exemplify a "glut of supply and shrinking demand". Selling prices in the area (SW8) fell 7% last year (LonRes) and some 28% of unsold properties have been on the market for over a year. At the same time, the UK's property websites are "awash with unofficial resales in developments including Battersea power station and Embassy Gardens" (find yourfavouritehere).

The good news here, as search agent Henry Pryor always tells us, is that with most bad news comes opportunity. So some developers are already offering to pay buyer stamp duty and others are offering "deals on furniture packs". Perhaps real price falls will follow.

Advertisement
Advertisement

Recommended

Beyond the Brexit talk, the British economy isn’t doing too badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Boris Johnson’s grand infrastructure plan needs some small print
UK Economy

Boris Johnson’s grand infrastructure plan needs some small print

Grand infrastructure projects are all very well, but it is the small stuff that delivers the big returns, says Matthew Lynn.
5 Jul 2020
Spend, spend, spend – think of it as your patriotic duty
UK Economy

Spend, spend, spend – think of it as your patriotic duty

After months of lockdown, many of us will have some money to spare. If you do, says Merryn Somerset Webb, spend it.
2 Jul 2020

Most Popular

How “support” and “resistance” can help you spot trading opportunities
Sponsored

How “support” and “resistance” can help you spot trading opportunities

Technical analysis can help traders manage risk and decide where to enter and exit a trade. One simple form of technical analysis is the concept of “s…
6 Jul 2020
House price crash: UK property prices are falling – so where next?
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
A first-half home run for investment trusts
Sponsored

A first-half home run for investment trusts

The investment trust sector has seen some extraordinary performance in the first half of this year. Max King looks at what's behind it, and asks: is i…
7 Jul 2020