A record number of luxury homes worth £60bn are being built in London, creating a construction crunch that could lead to many of them being delayed or even ditched, a report shows.
The number of new luxury homes being planned or built over the next decade has climbed 25% to 25,000 units, according to the report from EC Harris, a built asset consultancy. The properties have a combined sales value of £60bn, up 20% on the level reported last year.
The rate of growth is down from 29% in 2013 and 70% in 2012, indicating that there are fewer development opportunities in central London.
Mark Farmer, head of EC Harris’s residential team, said: “With the UK economy back on track and London deemed a safe haven for international property investors, it’s not surprising that demand for luxury homes is fuelling ever-increasing development.”
However, with developers and investors struggling to keep up with buyer demand, up to half the homes planned in the next five years could end up falling well behind schedule due to a lack of available contractors.
The South Bank is the most popular area for high-end homes, accounting for a third of new projects, closely followed by Chelsea, Fulham and the City.
There is growing interest in building homes valued at £500 to £1,000 a square foot, particularly near Crossrail, which will link west to east London, or close to the London Overground network.
The South Bank stretch from Battersea to Tower Bridge has had the largest increase in unit numbers, up 34% to 7,705 new homes under development. Chelsea and Fulham is next with a 6% increase to 4,861 homes, followed by the City, up 45% to 4,176.
The unprecedented level of building is creating a shortage of qualified workers, and the report predicts many projects will be delayed or even scrapped.
Farmer 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, when in a position to do so, 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.”
About 1,300 luxury homes are likely to be completed in London this year, 700 fewer than EC Harris had predicted last year amid delays in the construction process.
The consultancy defines luxury homes as those that will sell for at least £1,350 a square foot, up from £1,250 last year.
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