Ghost
towers: half of new-build luxury London flats fail to sell
Developers
have 420 towers in pipeline despite up to 15,000 high-end flats still on the
market
Rupert
Neate Wealth correspondent
@RupertNeate
Fri 26 Jan
2018 15.10 GMT First published on Fri 26 Jan 2018 13.10 GMT
The vast
Nine Elms development straddling Battersea and Vauxhall in south London.
More than
half of the 1,900 ultra-luxury apartments built in London last year failed to
sell, raising fears that the capital will be left with dozens of “posh ghost
towers”.
The swanky
flats, complete with private gyms, swimming pools and cinema rooms, are lying
empty as hundreds of thousands of would-be first-time buyers struggle to find
an affordable home.
The total
number of unsold luxury new-build homes, which are rarely advertised at less
than £1m, has now hit a record high of 3,000 units, as the rich overseas
investors they were built for turn their backs on the UK due to Brexit
uncertainty and the hike in stamp duty on second homes.
Builders
started work last year on 1,900 apartments priced at more than £1,500 per sq
ft, but only 900 have sold, according to property data experts Molior London. A
typical high-end three-bedroom apartment consists of around 2,000 sq ft, which
works out at a sale price of £3m.
There are
an extra 14,000 unsold apartments on the market for between £1,000-£1,500 per
sq ft. The average price per sq ft across the UK is £211.
Molior says
it would take at least three years to sell the glut of ultra-luxury flats if
sales continue at their current rate and if no further new-builds are started.
However,
ambitious property developers have a further 420 residential towers (each at
least 20 storeys high) in the pipeline, says New London Architecture and GL
Hearn.
Henry
Pryor, a property buying agent, says the London luxury new-build market is
“already overstuffed but we’re just building more of them”.
“We’re going to have loads of empty and
part-built posh ghost towers,” he says. “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 says
developers of luxury blocks lining the Thames have failed to sell homes despite
offering discounts, incentives and freebies – including free furniture, carpets
and curtains and even cars. He adds that new-build towers are proving hard to
sell because while they offer luxuries including concierge, gyms and spas,
“they’re all the same”.
Some
developers have delayed construction of projects, while others have taken
properties off the market. All 10 of the apartments at the top of the Shard –
priced at up to £50m each – remain unsold more than five years after the Duke
of York and the former prime minister of Qatar officially opened “Europe’s
first vertical city”.
Steven
Herd, founder and chief executive of MyLondonHome, an agency that specialises
in new-build homes for investment, says his firm is struggling under the weight
of overseas investors who bought in the last couple of years and are desperate
to sell.
He says
hundreds of Asian investors who had bought London developments off-plan in
2015-16 in the hope of making a quick profit by selling apartments on closer to
completion have instead lost hundreds of thousands of pounds. “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.”
He adds
that in one case a Russian investor bought an off-plan property in 2014 for
£3.1m, but couldn’t afford to complete and sold it for £2.55m.
Herd says
the Nine Elms development, near the new US embassy in south London, was one of
the best redevelopment schemes in Europe but consisted of “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 its
report, based on interviews with 684 developers across London, Molior says
sales of new homes in London fell by a fifth over the last three months of 2017
compared with 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.”
The report
says many developers face a “gloomy picture of falling sales” and are “perhaps
starting to become uncomfortable with the emerging situation”.
Molior says
some inexperienced developers who hoped to cash-in on demand from overseas
investors now find themselves “off-pitch in terms of the location/quality/price
equation”.
“Experienced
players are increasingly rumoured to be resorting to ‘Plan-B’, while the fate
of newcomers may depend on whether they can afford to sit-it-out or
rent-it-out,” Molior says. The consultancy adds that “plan B” would typically
involve a “bulk sale”.
Hoping for
great profits, developers have continued to build expensive towers, while the
greatest demand from Londoners is for more affordable homes. Estate agent
Savills estimates that 58% of demand in London is for homes priced below £450
psf, but only 25% of homes being built are at this price.
Marcus
Dixon, head of research at property data service LonRes, says the very peak of
the London prime property market was still selling well but it was proving
difficult to sell expensive and well-appointed apartments in big towers.
“Lots of
schemes started two to three years ago and are now coming to market,” he says.
“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.”
All 10 of
the multimillion-pound apartments at the top of the Shard remain unsold more
than five years after completion. Photograph: Alex Orrow/Alex Orrow -
www.alexorrow.co.uk
Dixon says
he expected developers to “go slow” or halt the later stages of developments
until they have managed to sell more of the stock they’ve already built. But he
adds that slowing production of flats was a lot harder than building
traditional houses. “If you’re building an estate of 100 houses in the
countryside, you can stop building when they’re not selling,” he says. “But if
you’re building a big tower you can’t have anyone living in them until the
whole tower is completed.”
He adds
that that if a homeowner can’t sell their home at the price they’re aiming for
they can withdraw it from the market but “for developer’s that’s not a solution
– developers in some ways are forced sellers”.
Dixon says
developers are switching their marketing efforts from overseas to local owner
occupiers, “but they compare the price of new-builds to the secondhand market
and find that there’s a high premium on new-build towers”.
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