We’ve written here several times about the slow car crash that is the new build luxury housing sector in London. See previous posts here and here – and for our most recent thoughts, listen to Henry Pryor and me discussing the matter on the BBC yesterday here (about 13 minutes in).
But today’s FT has a nice little story that makes it 100% clear that London property developers know they have over-reached.
The last few years have seen a surge in applications to convert office space to high-end residential homes (or “deposit boxes”, given that most are likely to be unoccupied): in the last four years, 4.4 million square feet of commercial space has been turned into housing in Westminster alone. Today, says the paper, “developers are reversing plans to convert offices in central London to luxury apartments” in the wake of a rise in commercial rents and a residential slowdown that has analysts predicting a 20% fall in prices.
So Land Securities has extended the commercial lease on a building it owns in Victoria despite having permission to turn it into flats, and Derwent London has shelved plans to convert a building in Savile Row.
So there you have it. With stamp duty rising, transparency demands increasing (see previous post), oil prices still well below $50 a barrel, and emerging-market currencies well down on their levels of a few years ago, it seems that there is a limited number of buyers for tiny two-bed flats priced at £1m plus. Who’d have thought it?
There will be more on this in this week’s MoneyWeek – subscribers can read all about it on Friday morning.