46% Now Built to Rent
Very much akin to other parts of the market reported here, new home sales started well in 2022. Evidence from the first quarter shows that just over 6,000 new homes were sold across London which is the highest for any quarter since 2018 and indeed the fifth highest quarterly rate since 2008.
Focusing in on the schemes which achieved more than 12 sales over the quarter (which is about 85% of activity over Q1), data from Molior highlights some interesting trends on the state of play for London’s new homes market. A large share of these Q1 sales were to large scale investors accounting for 46% of sales.
Within this it was chiefly Build-to-Rent operators (BTR), either with forward funded transactions or with homes which were destined for the sales market but switched to rental at completion, accounting for 41% of Q1 new build sales. Another 5% of sales were to bulk investors, not counted as BTR as their purchase doesn’t represent an entire scheme.
The data also shows the large proportion of new homes sales going through Help to Buy (HTB). The window of opportunity for HTB sales is now closing with the scheme due to be phased out in 2023 and many developers running out of stock destined for Help to Buy. Close to a quarter of all sales in the first quarter were to HTB. A further 6% of sales achieved were switched to affordable housing.
Overseas investors have been less prevalent through Covid, but these latest numbers showed that 8% of sales in Q1 were to overseas investors.
After accounting for these different types of buyers, it leaves a very small proportion that are UK buyers negotiating their own single purchase with the developer. This potentially suggests how far removed the new homes premiums have moved from the mainstream residential sales market, perhaps more an indicator of large-scale investor demand.
There is much of relevance to developers in the recent announcements on the Levelling Up agenda. A new £1.5 billion for the Levelling Up Home Building Fund is to being launched, which will provide loans to small and medium sized developers and support the government’s wider regeneration agenda in areas considered a priority for levelling up (for which London might not be the focus).