There has been a rise in demand for move-in-ready new homes in London, while off-plan sales continue to face challenges. However, with further interest rate cuts expected in 2025, confidence is building for a more stable—or even stronger—year for reservations, according to Knight Frank.
In the firm’s latest survey of over 50 volume and SME housebuilders, a third of London-based respondents said they expect reservation volumes in the capital to outperform 2024 this year, with nearly half predicting sales will be stable in 2025. A fifth anticipate lower sales.
In terms of demand, needs-driven domestic buyers and overseas investors alike are targeting build-complete stock in London given rapidly changing market conditions. The off-plan new home sales market has continued to face challenges in recent times amidst significant global political and economic headwinds, meaning purchasers are less willing to commit to purchasing a property that is still under construction, instead wanting to wait until greater certainty levels emerge.
The first quarter of 2025 may also see an uptick in first-time buyers ahead of stamp duty changes in April.
Overall, residential sales volumes across the entire London market rose 4% in 2024 compared with 2023, Knight Frank data shows. The market had a slightly stronger year in light of inflation easing and mortgage rates coming down.
But the picture is very varied across different price points. The top end of the market has seen the sharpest decline in sales volumes – with sales above £10 million plus down 32% on year, Knight Frank data shows. As a result of the political uncertainty surrounding the non-dom regime, and rising borrowing costs since the Budget, demand in the prime London property market is subdued.
Focusing on new home sales specifically, there has been strong activity at lower price points, partly driven by the greater availability of build-complete properties in this segment of the market and needs driven buyers. Knight Frank exchanges of new homes in the capital within the £500,000 – £750,000 bracket rose 20% last year compared with 2023, with offers accepted jumping by over a quarter. However, demand remains robust across higher price ranges as well, with significant transactions occurring in new developments within the £1 to £3 million range.
Knight Frank’s data also shows that while new home exchanges are picking up, there is much less competition with viewings, offers made and new applicants experiencing double digit declines on year.
Looking ahead, a third of London-based respondents to our Q4 survey said ‘falling mortgage costs’ will most help to support sales this year, followed by offering incentives. On the latter point, developers are primarily doing a mix of offering non-cash items such as carpets and white goods, contributing to legal fees and stamp duty and price discounting.
Developers are also actively investing in repurposing former retail spaces for mixed-use developments, with plans submitted in the second half of 2024 to convert Edgware’s Broadwalk Shopping Centre in north London into 3,365 homes and 460,000 sq ft of retail and leisure space.
Key launches this year include the 249-unit Opus, the first residential tower due to open at Bankside Yards in Southbank this spring, while first completions are scheduled at the 269-unit Hurlingham Waterfront scheme in Fulham by the end of September.
But as demand does start to pick up, the market is braced for a supply crunch. Completions in the capital are expected to come under pressure just 24 months from now. Only 6% of private sites under construction in London right now are scheduled to run into 2027 – none are set to run past 2028, according to Molior data.
In the capital, private housing starts in London fell to their lowest level in 14 years in 2024, down nearly 70% from their 2015 peak. Build-to-rent (BTR) starts have also hit their lowest annual level since 2014, our data shows.
All London boroughs bar two (Barking & Dagenham in east and Merton in south) have seen a reduction in starts since the peak of market 2015 and 2024, with two thirds seeing drops of over 60% (see map). More than half of all boroughs also saw a reduction in starts last year versus 2023.
Supply constraints will sustain pricing in the capital, with our forecasts predicting 2% growth this year, another 2% in 2026, and cumulative growth of over 15% over the next five years. The London new homes market is gaining momentum, driven by needs-based buyers prioritising completed stock and supported by easing mortgage rates. Developers who adapt now will be well-positioned to launch new schemes into a market with increasingly limited supply.
Read the orginal article: https://propertyindustryeye.com/demand-is-growing-for-move-in-ready-new-homes-knight-frank/
