There are currently a record number of luxury homes being built in the capital and experts have warned that demand could outpace construction capacity, especially in London.
Now that the economy appears to be getting back on its feet, London is once again attracting high-end international investors looking for a safe market to buy property in. Demand for new luxury homes is exceptionally high and still increasing with 25,000 units worth of new luxury housing to be built over the next decade – up 25% from last years predictions, according to EC Harris.
The value of these new luxury homes is estimated to be around £60 billion, but there are serious concerns that the construction capacity and resources to build the homes are just not there. Mark Farmer, head of EC Harris’ residential team said:
“There is simply not the capacity out there to meet demand and many projects will undoubtedly fall by the wayside or experience delivery difficulties due to sheer lack of resources. Many developers and investors […] are therefore looking to jump the queue and are paying premiums for construction so they can deliver on promises they have already made to their purchasers.”
An estimated 1,300 new luxury homes are due to be completed in London this year – 700 fewer than EC Harris had predicted last year. A ‘luxury home’ is defined by EC Harris as one that will sell for at least £1,350 per square foot, up from £1,250 last year.
There have been calls for the government to get involved directly in the construction industry and help with home-building to achieve the ambitious target of 300,000 new homes built this year. The Treasury Chief Secretary, Danny Alexander, has been vocal in his support of the idea saying: “It would be an unprecedented change in housing policy, guaranteeing levels of house building not seen since the post-war era”.
However, Alexander has clearly not given much thought to the availability and capability of the construction industry to achieve these levels, as the industry is already being stretched to the limit as detailed above.