Record luxury homes planned in London

London luxury houses copy


The record number of luxury homes planned in London, equivalent to more than double the size of the city’s Hyde Park, is raising the prospect that developers may be forced to turn some projects into offices as demand falls, according to consulting firm Arcadis NV.
Plans are in the pipeline for 35,000 high-end properties worth almost £77 billion in the coming decade, 40 percent more than in 2014, Arcadis said in a report on Monday. The homes would span more than 40 million square feet, compared with Hyde Park’s 15 million square feet.
The surge in supply comes just as demand is weakening, with international investors deserting the market in the wake of higher property taxes and slumping commodity prices. Developers are already offering discounts of as much as 20 percent on bulk purchases of upscale apartments.
Arcadis defines luxury homes as those priced at £1,350 a square foot or more.
“It remains to be seen how the market responds to the new set of challenges being thrown at it,” Mark Cleverly, Arcadis head of commercial development said, citing land, materials and labour cost inflation. “This, coupled with a recent gradual easing off of buyer demand could affect margins and mean developers opt to convert their developments to target the more buoyant office and commercial markets.”
Almost a third of the luxury homes planned in the next decade will be developed in the district it terms Chelsea & Fulham, with more than a quarter planned for the south bank of the River Thames stretching from Battersea to Tower Bridge, Arcadis said. Home prices in Chelsea fell 2.5 percent in the year through March, broker Knight Frank LLP said in a report last week.
The number of homes in the pipeline in Chelsea & Fulham has more than doubled since 2014 to 10,914, Arcadis said. About three-quarters of them are part of Capital & Counties Plc’s development in the Earls Court neighbourhood.
Jefferies LLC analyst Mike Prew cut his target price for the company in February, predicting the value of the development site could drop to £30 million from £50 million per acre within 12 months.
Some developers have already decided against converting offices into luxury homes because of falling demand.

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