London New Home Sales Plummet to Lowest Since 2012

(Bloomberg) -- London new-home sales fell to their lowest level in almost nine years in the first quarter, led by a lack of interest from landlords and a dearth of buyers for central properties.

Sales of the homes tumbled 39% to 3,703 compared with the same period last year, according to data compiled by Molior London and seen by Bloomberg News. The researcher calculates the numbers based on transactions at projects with at least 20 units.

London's housing market is in flux as a premium on space and greenery causes the value of suburban houses to rise and apartment prices to fall. Sentiment in the new homes market improved in March as Prime Minister Boris Johnson's timetable for easing lockdown restrictions boosted confidence, according to Molior.

“London's been one of the weakest markets over the past year” as people now prefer to buy houses over apartments, said Aneisha Beveridge, head of research at broker Hamptons International. The majority of new-build sales in London are apartments so the decline reflects that change, she said.

Homebuilder shares rose on Thursday on optimism about the vaccination program, which allowed England to begin reopening its economy after about 100 days of restrictions, raising the question of whether the popularity of urban life will return to a post-pandemic London.

Developers opted for a wait-and-see approach in the first quarter, with the number of new homes starting construction tumbling to its lowest level since 2011.

“The building industry has reacted to the more dampened environment for London properties,” Colin Sheridan, an analyst at J&E Davy Holdings Ltd., said by email. “It's worth noting that the step-back in construction activity should support pricing in the medium-term, which should be a mitigation for London-exposed builders in the coming years.”

Read more: London apartment values start to rebound after Covid hit

Apartments have also lost popularity after thousands of owners found out their buildings might be structurally unsafe because of the cladding used during their construction. The owners face paying thousands of pounds in costs after their predicament came to light following the Grenfell Tower fire tragedy in 2017.

Help to Buy

The number of buyers using the Help to Buy program, under which the government provides an interest-free loan of as much as 40% of a new home's cost for five years, rose in the period ahead of changes to eligibility criteria this month.

Landlords, meanwhile, were deterred from buying purpose-built units as rents fall. Overseas buyers acquired 210 new homes in the quarter in projects with at least 12 units, less than half the amount in the same period last year, Molior's data show.

“The projects that have sold more than a steady trickle of units overseas over the last three months are often accompanied by rumors of widening discounts,” according to a draft report by the researcher.

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