London new home sales tumble to lowest since 2012 as rates weigh

London: Sales for newly-built homes in London have slumped to their lowest in over a decade as surging borrowing costs weigh on the city’s housing market.

Developers in the capital managed to sell just over 3,000 new homes between April and June, according to data compiled by Molior London and seen by Bloomberg News. That’s lower than any quarter since 2012, and compares to 3,855 homes sold during the second quarter of 2020, when Covid-19 led to a national lockdown.

“Marketing suites are reliant on incentives and a refocusing towards a small pool of discretionary purchasers” in the UK, the report’s authors said. “Overseas sales, particularly from Hong Kong buyers, have also recently slid.”

The data - which is calculated based on transactions for projects with at least 20 units - spells out the misery facing London’s housing market as pricey borrowing wreaks havoc on demand. Barratt Developments, one of the nation’s biggest homebuilders, last week said it had turned to the private rental sector in a bid to drive revenue while high interest rates weighed on sales.

What’s more, a record number of projects have ground to a halt. About 70 projects are currently stalled in the capital, and around 20 of those stopped before construction emerged significantly out of the ground, Molior said.

Construction starts and completions were both just over 4,000 between April and June, compared with about 3,550 and 3,090, respectively, in the previous quarter but below the three-year average. Development levels “could have been worse” during the quarter, according to Molior, though the numbers are inflated by a handful of large projects.

More than half of the newly-started homes were in just nine projects, the biggest of which is an 11-block development in Barking & Dagenham, an east London borough that’s growing in popularity.