Development of prime homes set to rise despite predicted dip in demand

by: Rebekah Commane
  • 12/04/2016
  • 0
Development of prime homes set to rise despite predicted dip in demand
An estimated £77bn worth of prime property is set to be constructed in London over the next decade, despite an anticipated dip in demand.

A report from consultants Arcadis predicted that 35,000 homes will be constructed in the capital by 2026, a substantial increase on the 25,000 figure estimated in 2014.

There were 196 sites identified across the capital by the consultancy firm for natural and built assets, with a combined floor space of over 40 million square feet – greater than the entire area of the City of London, which is 30.7 million square feet.

Chelsea and Fulham have seen the strongest interest, with almost 11,000 homes in development, worth an estimate £20bn, followed by South Bank at 8,863, worth £14.2bn.

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, rising construction costs and growing land values have seen input costs rise, according to the report, while demand is decreasing due to the replacement of the Stamp Duty ‘slab’ structure and economic slowdown in countries like China.

As a consequence, it predicts some investors may reposition these assets away from prime housing and into premium office space, mixed use or even a greater number of smaller homes as they look to markets that offer a greater margin.

Cleverly explained: “With no obvious end in sight to the unpredictability of the global economy this approach could soon become the norm.”

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