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Prime London home developments top £77bn despite rising costs

The number of prime London homes set to be built in the next 10 years continues to rise despite the rising cost of land and materials, according to a report released today by consultants Arcadis.

Figures in the report outline how 35,055 new prime homes are in the pipeline, worth a combined total of £77bn across 196 sites in the capital.

The numbers represent a 40% jump on the number of new prime homes that were in development in 2014, which totalled 25,000, and attest to London’s current robust market for homes costing £1m or more.

Of all the locales in ‘Prime London’, Chelsea and Fulham are currently attracting the most investment with 10,914 new prime homes planned, equating to a potential total value of £20bn, followed Southbank (8,863 new homes) and in and around the City of London (5,898 new homes).

Commenting on the report, Mark Cleverly, Arcadis head of Commercial Development, said: “Since around 2009, the value of prime residential property in central London has seen dramatic rises, making it one of the hottest markets in recent memory.

“So, it is hardly surprising that we have seen ongoing interest from investors all over the world. What is interesting, though, is the continuous geographical spread we are seeing.

“Prime housing is springing up around regeneration areas and on the outskirts of the financial district, suggesting the days of the West End dominating the high-end property market may be over.

However, the report warns that rising construction and land costs, along with economic slowdown in China and stamp duty rises, are causing input costs to rise and demand to soften, fuelling fears about a potential oversupply of luxury apartments and flats in the city.

Touching upon these fears, Mark added: “It remains to be seen how the market responds to the new set of challenges being thrown at it. Land, materials and labour are growing in price, meaning the costs involved in actually building these homes is growing significantly.

“This, coupled with a recent gradual easing off of buyer demand could affect margins and mean investors opt to convert their developments to target the more buoyant office and commercial markets. With no obvious end in sight to the unpredictability of the global economy this approach could soon become the norm.”

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