Empty Flats

Who is buying all the new flats being built all over London? The story was that they were being sold at around 10% below the offer price.

Now it transpires that they are not being sold. An article by Judith Evans in FTMoney this weekend reports;

London’s luxury developers are selling off homes in bulk to corporate landlords after a drop in demand for new-build homes among individual buyers.

Almost 40% of London new-build sales in the second quarter of 2018 were to bulk buyers, who generally purchase at a steep discount with the aim of setting up portfolios of rented homes for large-scale investors. Such purchases are masking continued drops in individual sales of new apartments, said researchers at Molior London, which monitors housing developments.

Some 2,008 new-build homes – or 39% of sales in the quarter – were bought in bulk in the three months to June.

Will these large-scale investors find tenants for their properties? I think not and the consequences will be serious for a genuine buyer who wants to live in a new-build development. First, there won’t be many neighbours so it will be nice and quiet. Secondly, either the service charge will go through the roof or the extravagant facilities will be closed. The lifts will stop working, the swimming pool will be emptied, the lights switched off in the gym and the rooftop bar closed.

Developers see this happening and are pulling the plug on new projects in London. A test will be what happens to the 76 acre site in Earls Court, where the exhibition centre was. Falling land values, hostile neighbours and a not-over friendly local council make it look like a non-starter that will probably be developed on a more modest scale with council participation.

If you are a train spotter you might be attracted to this development at West Brompton with a fine view of the railway.

Sorry, I’m not smart enough to know who is going to get hurt but there is a high-end property crash in London that will wipe out some developers and their shareholders. Greed comes before a fall.

https://youtu.be/ZQHuNHsce6E