Member Article

Battersea write-down highlights tumble in London new build sales

Development at the massive Battersea Power Station residential development hit a new snag last week after the developer’s revealed that there would be a delay in construction of the affordable housing portion of the scheme.

With projected investment returns dropping from 20% to just over 8% due to the downward pressure on London house prices, particularly at the upper end of the market, and a glut of unsold new housing stock, the developer has said that the current plans for affordable housing at the project are no longer economically viable.

The move comes as new figures released by LCP revealed that new build sales across some of London’s upmarket postcodes faltered last year as the economic climate combined with Brexit and stamp duty changes to put pressure on the market.

According to Land Registry figures analysed by LCP, completed sales of new build flats in prime central London were down by 41.4% by the end of 2016 compared to 2015. Average prices also underwent a 8.7% to £1.9m.

For Inner London the figures were slightly more heartening, but the area still suffered a 3.9% decline in new build flat sales last year, with a further 29% fall in Q4 and 2.1% drop in prices.

LCP blames both Brexit uncertainty and residential tax changes for the falls, with stamp duty rises particularly impacting the upper end of the market with sales of homes worth £5m falling over 50% across inner and central London.

Naomi Heaton, Chief Executive Officer at LCP, commented: “The struggling performance of the new build market in Inner London will certainly be beginning to worry developers. It has already been reported that Battersea Power Station has reached a ‘critical stage’ and has written down its projected investment returns from 20% to 8.23%.

“As is now being seen, in areas such as Battersea-Nine Elms, there is a saturation of over-priced, over-supplied ‘commodity style’ property which leads to a softening market, particularly during times of instability.”