Overseas Buyers Return
New Homes sales returned in Q3 as overseas investors came back into the central London market. Domestic buyers showed little to no interest in paying premium prices for premium apartments but the international investor has stepped in once again to secure a stake in London’s prime housing market. Sales rates remain slow however and we expect a revival of overseas exhibitions in the Middle and Far East in 2022, to promote London’s unsold new homes – always assuming that Covid is kept at bay and travel restrictions are not reintroduced.
The developer’s tax announced in the October budget is intended to raise £2 billion towards the cost of the cladding crisis. Large housebuilders with profits of more than £25 million will be taxed at 4% on profits above that level over the next 10 years. The tax is designed to claw back taxpayers’ money committed to the cladding crisis. However, housebuilders have warned that it will hit investment in new developments and jobs. The government is also introducing a levy on new high-rise developments that will be applied on submission of a planning application.
The number of land transactions in London remained low despite a growing demand for small and medium size sites. Site owners are not under pressure to sell and are frustrated that prices in London remain at 2014 levels. As with the general sales market, owners would rather wait for prices to rise than sell at this point in the cycle.
It is perhaps surprising that office development continues to attract interest given the trend towards remote-working but employment space is often strictly protected by planning policy and developers are discouraged by the cost of applying for change. For instance, Permitted Development Rights which, in theory, give an automatic consent to change from commercial to residential use, have very limited impact in central London because so many boroughs have successfully applied for an Article 4 direction which overrules the permitted development rights. The London Boroughs of Camden, Islington, Southwark, Tower Hamlets and The Corporation of London have all implemented an Article 4 direction.
Across the UK the Private Rental Sector (PRS) / Build To Rent (BTR) sector grows from strength to strength with institutional investors now including Lloyds Bank who launched a new brand – Citra Living – with the aim to become the UK’s largest private landlord and John Lewis who announced their intention earlier in the year to deliver rental homes Legal and General are already building their portfolio on rental homes across the UK. There remain very few examples of institutional investment in zone 1 and not many in zone 2 with a major exception at Wood Wharf E14 where The Canary Wharf Group is looking to add 1,342 waterside homes and a further 624 apartments at Park Place to add their growing rental portfolio. Telford Homes is building units for rental in Nine Elms, opposite the US Embassy.