New-build luxury London homes could outlast existing properties on the market

New-build developments in the capital’s most popular areas could remain on the market for longer and be sold with higher discounts than existing homes, according to new analysis by Coutts.

The latest Coutts London Prime Property Index (CLPPI) explored residential properties worth between £1 million and £10 million in 15 parts of London for Q4 2017. The report found that, with 26,000 new units currently under construction or with planning permission in these areas making up roughly half of all developments across London, there is a risk of oversupply.

Central and West & South West London currently have the largest number of new developments, with Battersea alone making up 22% of new buildings under construction. The CLPPI also predicts that luxury property prices in London are likely to stagnate for the next two years but rise quickly from 2020 as the housing market recovers.

So far, over 7,500 new homes are currently under construction, with an additional 19,000 having planning permission to be built. The top three areas where this is taking place are: Kensington, Notting Hill & Holland Park (25%), Battersea, Clapham & Wandsworth (15%) and Fulham & Earl’s Court (9%).

The redevelopment of Earl’s Court, Battersea Power Station and King’s Cross have also been noted as key sites to look out for. The areas covered by the CLPPI include 132 schemes currently under construction, and 224 schemes with planning permission of – greater than, or equal to – 10 private units.

What’s more, the Elizabeth line (due to open in December) will connect 41 stations from west to east London and transport around 200 million passengers a year, which is expected to have a positive knock-on effect on Central London.

George Toumbev, head of lending propositions at Coutts, commented: “This quarter’s insight into new developments shows London as an ever-changing city and a fascinating place to invest in for those with long term investment horizons.”

“As luxury new developments do come at a premium, can be sensitive to property downturns, and are often concentrated in a few areas, we encourage buyers to remain cautious about this part of the market and to be mindful of the local market prices for existing property in the area.”

The index also shows a possible end to the decline in London Prime Property (between £1 million and £10 million). Sales are currently up 1.1% compared to the previous quarter, although 9% down compared to the last quarter of 2016.

“The addition of rental yields to the CLPPI allows us to position property investments alongside our wider range of banking and investment services,” said Mohammed Kamal Syed, head of global market at Coutts.

“For buy-to-let investors, the environment remains challenging given the unfavourable tax environment, low yields and limited capital growth prospects. We work with our clients to stress the important role in achieving diversification within their investment portfolio.”