Half of all new build units in London sold off to buy-to-let market
Published by Max Salsbury for 24dash.com in Housing and also in Finance
Half of all new build units in London sold of to buy-to-let market
Nearly half (46%) of all the new build accommodation sold during 2013 in London has been snapped up by the buy-to-let market.
And the new research by specialist fund and asset managers London Central Portfolio shows that £1.2 billion in new build accommodation has been sold in the capital so far this year.
Last year saw 40% of new build homes in Westminster sold to buy-to-let magnates, while 52% went the way of investors in Kensington and Chelsea.
The sales mirror data from the 2011 census which shows 50% of all privately owned units in central London are let out.
It's not all bad news though - apparently, some investors could come a cropper and lose some of their money.
According to LCP, buy-to-let investors pay a premium for new units, in large part due to the "massive marketing hype which surrounds new developments". LCP's research found that in prime central London this amounts to 20%, where the average square foot price for a new build stands at £1,701, compared with £1,418 for an older property.
The risk to investors is that there will ultimately be a chronic oversupply of new-builds units, both to buy and to rent, suppressing yields and prices. Units in new builds can also suffer limited re-sale potential once they are no longer new and buyers have moved on to the next marketing phenomenon.
LCP notes that whilst the number of new units available to buy in central London is tiny – there have only been 77 new build sales this year - it is a different story elsewhere in inner London.
In Wandsworth, home to the well-publicised Battersea Power Station and Nine Elms developments, there are 14,306 units in the pipeline.
Meanwhile, between them Tower Hamlets and Southwark have 33,646 units in their development pipeline.
Naomi Heaton, CEO of LCP comments: “New builds are marketed off-plan at glamorous property exhibitions as speculative investments. Buy-to-let investors often see them as a hassle free alternative, which negates the need for searching and travel.
"They also offer a modernity which Asian buyers, in particular, associate with ‘high’ end. However, as investment choices, they need to be entered into with care."