Residential development in 2017 for London had 1,900 new luxury apartments become available but nearly half are empty for lack of buyers and are now being labeled as ‘posh ghost towers’. The number of unsold new luxury apartments is now nearly 3,000 with prices of at least £1 million and up.
Developers had been relying mostly on foreign buyers but the Brexit negotiations and the stamp duty on second homes seems to have made buyers and investors take a pause according to data provided to The Guardian by Molior London.
The units ready for move in feature all the amenities that could be expected from the luxury sector with swimming pools, private gyms and concierge services.
London continues to have affordable home issues with a constant lack of supply and new prime luxury units would seem to be the least newly developed residential sector.
Lack of Sales
Property data shows the 1,900 units being priced at £1,500 per square foot with high-end three bedroom units with 2,000 sq feet fetching nearly £3 million. The total number of empty unsold local properties is near 14,000 with per square foot prices ranging from £1,000 to £1,500 with the national average of the UK of £211.
Molior expects it would take three years to sell off the current volume of properties if new construction was not to take place. However, new property towers are now preparing to develop 420 residential properties with each being 20 storeys high according to New London Architecture and GL Hearn.
Speaking to The Guardian property buying agent Henry Pryor describes the London market as
“...already overstuffed but we’re just building more of them”.
“We’re going to have loads of empty and part-built posh ghost towers,”
“They were built as gambling chips for rich overseas investors, but they are no longer interested in the London casino and have moved on.”
Pryor describes developers are trying to sell their properties by offering discounts, free furniture, carpets, curtains and automobiles to potential buyers.
Projects for new residential towers in some cases are being delayed for construction with others who have been unable to sell units have quietly taken these off the market.
Foreign investors who bought into the market over the past years now want to cash-in and sell their luxury units but are finding it difficult to attract buyers.
Steven Herd, CEO and founder of MyLondonHome, reports that Asian investors who had hoped to make a profit after buying in the period 0f 2015-2016 are losing hundreds of thousands of pounds, says :
“They intended to flip [buy and sell on] the apartments and make big profits, but it hasn’t worked out like that, and now they are trying to get out at the smallest possible loss.”
Herd also states that the new developments in the south London borough of Wandsworth mainly in the area of the the new American Embassy on Nine Elms has been one of the best in Europe. He claims that the redevelopment for the area had brought ‘... “the wrong properties that Londoners don’t need”.
“We need ‘affordable’ one- or two-bedroom apartments priced at £500,000. We don’t need swimming pools and empty rooftop bars with no one living at home to buy drinks at them.’
‘There’s just way too many £1.5m-£2m-£3m flats that all look the same.’
“We’d be much better off with decent quality but lower-spec homes built for actual Londoners."
“What’s the point in having private cinema rooms that sit empty and resident’s swimming pools with no one swimming in them; it just seems wrong.”
In a survey of 684 developers Molior reports that sales of new residential properties dropped by a fifth in the last three months in 2017 when compared to the previous quarter.
“New starts on site also fell by a fifth, but starts still out-paced sales … so the number of unsold units continues to grow.”
Marcus Dixon, head of research at property data service LonRes, says in The Guardian that prime market was continuing to see some sales.
“Lots of schemes started two to three years ago and are now coming to market.”
“It’s the big towers with lots and lots of units in them [that are proving hard to sell]. Those in Nine Elms [near Battersea power station] and Earls Court which in the less distant past would have been sold off-plan to overseas investors. But the buyers, for various reasons including Brexit, just aren’t there any more for those sort of properties.“
“The volumes that are coming out of the ground in Nine Elms are huge, and it’s a lot of flats that are all quite similar in terms of spec and price.”
In comparing the construction between luxury towers and traditional homes Mr. Dixon states:
“If you’re building an estate of 100 houses in the countryside, you can stop building when they’re not selling...”
“But if you’re building a big tower you can’t have anyone living in them until the whole
tower is completed.”
To maximise profits the construction of luxury residential towers has dominated the London market while the main issue for residents particularly young workers and families has been new affordable homes. Savills estimates that 58% of London home demand is for prices at or below £450 per square foot. At this time only about 25% of new homes are in this price range.
For those buyers who have the means to afford it there are 10 apartment units on the top floors of the Shard with asking prices each at £50 million. These units have been available for the past five years since the Duke of York and the former prime minister of Qatar presented the Shard as “Europe’s first vertical city”.