London's top boroughs see prices plummet most in five years
Land values in central London’s best districts fell 10.3 per cent in the year through September, the biggest fall in at least five years, as higher taxes and the Brexit vote cause luxury home prices to fall.
Banks are less willing to lend for site acquisitions and construction, fuelling the decline in values, the broker Knight Frank said in a report on Wednesday. Developers also need to raise their profit margins as a buffer against any further falls in home prices, the broker said.
“With the current level of political uncertainty, increased risk has been placed on house builders, causing them to look for greater margins,” said Justin Gaze, the joint head of residential development at Knight Frank. Outside of central London “demand for new homes is strong”.
The number of unsold central-London homes under construction will reach a record high this year, increasing the risk that developers’ bets on rising demand for luxury properties will go sour. Shares of property developers with large projects in the UK capital’s best districts have lagged competitors since the referendum after they began to write down the value of their holdings on falling sales prices.
Capital & Counties Properties wrote down the value of its land holdings in the Earls Court district by 14 per cent in July and they may fall a further 10 per cent this year, said Peel Hunt analysts including James Carswell. St Modwen Properties said the value of its stake in a project in the Nine Elms district fell by 17 per cent after home-value forecasts fell by almost 4 per cent.
Ireland’s National Asset Management Agency has appointed receivers to a company that owns a luxury-home project in London’s St John’s Wood district after the development stalled under its current management. The project was previously offered for sale through Jones Lang LaSalle and the receivers are now considering a new strategy to dispose of the site.
Land values in London’s best districts such as Westminster and Knightsbridge began to surge from 2012 as developers from China to Malaysia bet that the market for luxury homes would remain strong. Instead, increases in taxes and rising values dampened demand, and home prices there are now almost 11 per cent below their 2014 peak, according to broker Savills.
Home prices in the capital may decline as much as 30 per cent as the UK economy weakens following the vote to leave the European Union and companies move staff overseas, said SociÃ©tÃ© GÃ©nÃ©rale analysts including Marc Mozzi. The number of homes under construction in London’s best districts will hit almost 11,000 this year, according to data compiled by Molior London.
Follow The National’s Business section on Twitter