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London's Stockpile of Unsold Homes Jumps to an All-Time High


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Worth pointing out (for people that can't be bothered with Bloomberg) that this is completed, unsold.  Ie:

  • Not normal churn slowed down
  • Not investment properties that the strange buyer doesn't want to spoil by actually having a resident
  • But actual built and unsold properties -- ie, builder's (financier's) problem.

 

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40 minutes ago, dgul said:

Worth pointing out (for people that can't be bothered with Bloomberg) that this is completed, unsold.  Ie:

  • Not normal churn slowed down
  • Not investment properties that the strange buyer doesn't want to spoil by actually having a resident
  • But actual built and unsold properties -- ie, builder's (financier's) problem.

 

Don't think these units are fully included in the general figures (Rightmove) as stock for sale levels there not spectacularly high. There has been a fair bit of new build in London but I bet at peak demand pretty much all would have been sold pre-completion - in fact part of the financing model probably required that for multi-phase developments. Been getting a stack load of spam property "investment" emails so that ties in with problems shifting this stock.

 

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12 minutes ago, onlyme said:

Don't think these units are fully included in the general figures (Rightmove) as stock for sale levels there not spectacularly high. There has been a fair bit of new build in London but I bet at peak demand pretty much all would have been sold pre-completion - in fact part of the financing model probably required that for multi-phase developments. Been getting a stack load of spam property "investment" emails so that ties in with problems shifting this stock.

 

What makes this more complex is that some vendors (builders) have put sales on hold while they wait for the market to improve (usually stated as 'Brexit effect').  The Centrepoint development is a case in point.  IMO they'll regret not flogging off as soon as possible, but I suppose they might be right.

What I don't understand is the sheer business case of this delay.  There are two types of property 'financial deal' -- the speculative investment case and the improve and % profit on development case.  Across different business types these two tend not to mix -- eg, oil companies make their money by selling oil and profiting on the D between production and sale cost.  They don't (particularly) keep the stuff in the ground because it'll be worth more in the future.  But in property these two things get mixed up.  IMO the developers should just sell -- if they want to make money on speculating then that should be a different financial vehicle.  

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The problem for the developers is that they can't drop the price as that will drop the valuations of the sold units and that would probably lead to lawsuits. However as they usually use a different limited company for each development they can sell that company including all the unsold units without the sale appearing on the land registry as the owner of the property hasn't changed.

These usually sell at a big discount to the likes of pension funds and investment funds who can book them at cost and raise the book value every year until they reach the retail value. They don't have to actually sell any units as any "profits" are just on paper as the value of the "asset" appears to keep rising.

Hence all the empty units that aren't being actively marketed.

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Judging by my neck of woods, someone is really seeing things that I don't. There's already one big, largely unsold completed development in Hornsey, with another one nearing completion as we speak. There's another one being developed in Crouch End - mind boggling 1700+ apartments in a ward of 13k residents, already available for sale. And, to top it off, Turnpike Lane - Wood Green area has been marked for another 4400k in the coming years, a good few hundred is already in early stages of development and some are even marketed. Thats over 6k flats in a small area housing roughly 40-50k people at the moment. Nearby Muswell Hill got blessed with a whole new mini-village, priced between 800k and 2.3mil, plus a handfull of smaller developments. Someone is clearly insane. Could be me.

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Same in Bracknell. Despite low sales volumes generally the builders continue to chuck them up. There's been a Redrow coming-soon sign for about 3 years on the swampland near my office but they have now started building even on that. 

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7 hours ago, dgul said:

Worth pointing out (for people that can't be bothered with Bloomberg) that this is completed, unsold.  Ie:

  • Not normal churn slowed down
  • Not investment properties that the strange buyer doesn't want to spoil by actually having a resident
  • But actual built and unsold properties -- ie, builder's (financier's) problem.

 

I pointed out that, in my travellings i nthe South, one thing was obvious - loads of brownfield development has been happening i nthe last 3-5 years.

Office blocks (normally finsec that have become strangely err empty sicne 2007ish) knocked down and OAP and horriblly small town houses built.

Smaller office - converted to flats - err where the parking. Or the living space.

I see this in town after town.

Builders have been very busy, doing this job thee, that job there.

 

However ....

the other thing I notice is that none of the fuckers are occupied - bar the 20% of social housing quota.

I also get a sign that these developers are starting to panic, bank or fintech lender on their back for payment.

They appear to be defaulting/ slow to pay contractors and tradesman.

I you know any tradesman who's been flush in the last few years then Id get any money off him ASAP.

 

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8 hours ago, Sideysid said:

https://www.bloomberg.com/news/articles/2018-11-20/london-s-stockpile-of-unsold-homes-jumps-almost-50-to-a-record

Lucky there’s a ‘shortage’ of property, I’m sure these will all get snapped up post Brexit on the cheap, when foreign investors are fighting tooth and nail for a shit box in Croydon.

No, no, no SS you have it wrong, there will be a shortage when they are bought by BTL landlords who are then `forced` to sell them due to `unfair` tax (breaks)...this is when they evaporate and disappear! :-)

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2,374 unsold new homes isn't really that many when you consider there were about 3.28 million households in the capital circa 2011.  I won't get excited until this hits the 10's of thousands.

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1 hour ago, PaulParanoia said:

2,374 unsold new homes isn't really that many when you consider there were about 3.28 million households in the capital circa 2011.  I won't get excited until this hits the 10's of thousands.

Nope.

These are new houses. Typically they make up a small number of selling stock.

The other issue is these are ready to sell. Normally when markets slows, they slow or stop finishing units - for every unsold new build there will be 10 about could be finished units.

Theres a massuve pile up of new build.

Itll be brutal.

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