Adaptable strategies to maximise new build sales
According to the Land Registry, the luxury end of the London property market has finally burst. Super prime sales have collapsed, but it’s not Brexit that’s to blame. With tens of millions in property developments designed for the high-end market remaining unsold, developers have to employ remodelling strategies to shift and sell their developments.
Here I’ll look at how the bottom has fallen out of London’s luxury property market, and what developers are doing to sell their developments. You’ll also discover how we work with developers to create strategies that sell.
Stamp duty stomps all over luxury development property sales
When the government increased stamp duty rates, it did so in the hope of reducing the number of additional properties bought. The idea – at least publicly – is that this will deter investors and leave more housing stock on the table for ‘genuine’ home buyers.
In the run-up to the introduction of the additional stamp duty land tax of 3%, buyers rushed through their purchases in March. Investors avoided the extra stamp duty, and the property market went through a month of incredibly high sales numbers. The extra demand helped to push property prices higher. Sales for two or three months suffered because purchases had been rushed through the market early. We also had Brexit in between.
A lot of market watchers blamed the fall in property investment transactions on Brexit, but with property market transactions now normalising again, it’s clear this wasn’t the case.
At the luxury end of the market, the so-called ‘super prime properties’ worth £10 million and more, sales have collapsed. In the three months to August 2015, there were 35 properties sold in the luxury bracket in London. This year sales have hit the rocks. Only five £10 million-plus properties sold in London in the comparable period. This lack of interest has also hit prices paid – an average of £16.3 million this year compared with £22 million last year.
The hardest hit in the luxury sector has been new builds – not a single one has sold.
Deflation of the bubble was inevitable
Prices of high-end luxury property in London have increased so far, so fast, that a correction was inevitable. Prices at the upper end of the market are always the first to be hit. With a review of non-dom inheritance tax on the cards, it’s unlikely that this end of the market will bounce anytime soon. Some analysts are predicting a multi-year lull in luxury home prices; and not only in London but across the UK.
Lower sales numbers at these higher prices might dismay the government (it will collect less stamp duty), but it could be devastating to developers who haven’t got a plan B. This is where revised off-plan property sales strategies come into play.
Deflating your luxury property could inflate your sales
We’ve found that the death of billionaire buyers is prompting developers to evolve their plans, and it’s working. As super prime sales have fallen, we’ve found that investment interest in smaller, more affordable properties has increased. It is especially the case from our foreign investor base, which has benefitted from the fall in the value of the pound. Off-plan property sales have suddenly become 20% better value. (Read more in our article “Foreign property investors demand new build property post-Brexit”.)
Developers are remodelling their projects to appeal to the lower end of the market, where investment is still strong. It means creating four or more apartments from one, with lower price points that appeal to a different investor profile. There are planning hurdles to overcome, but once these have been ironed out, the developer can employ a range of strategies to sell to a more engaged audience.
Working hand-in-hand with developers
While the developers we work with have been building new developments in the best places and to the highest standards, we’ve been developing an excellent network of investors at home and abroad who turn to us to benefit from off-market property investment opportunities.
We discuss marketing plans with the developers and then swing into action with some sales strategies that protect the integrity of the development while increasing off-plan property sales.
We discuss property fundamentals (shops, schools, transport links, major employers and major investment) with the investor, relating how the developer’s property offered fits into the growth and income producing bracket that our investors are seeking.
Our investors rely on us to source incredible and exclusive deals – they take on a larger risk because we’re able to offer them ground floor opportunities that have real rental appeal in the long term. These investors aren’t for flipping; when it comes to selling your next tranche of off-plan properties, you won’t find you’ve got unexpected competition for buyers’ signatures.
Foreign investors are the lifeblood of off-plan property sales
We’ve seen a sizeable increase in enquiries from foreign property investors. They’ve been buoyed by the fall in the value of sterling. Despite the Brexit negativity in some quarters, the UK is still a great place to invest. Housing demand outstrips supply, we benefit from a stable government, and there’s an entrepreneurial spirit that is the envy of the world. The UK is the fifth largest economy in the world, and Brexit is unlikely to change that.
Meeting the challenges of off-plan sales together
Developers face some challenges. Working with local councils to source the best locations for development is among them. But the UK needs more than 1 million new homes, so the opportunity for developers is very much alive.
Property investors are interested in off-plan property in the best locations. That means buying property that benefits from nearby shops, schools, and transport options. Our investors expect these fundamentals to be present; repositioning difficult-to-sell super prime properties is a strategy that is likely to create units that investors want. We can then work together to create a sales strategy that compels investors to invest in your newly planned off-plan properties.
Contact us today on + 44 207 923 5680, and we’ll be happy to discuss the help and expertise we can offer you as we link the best developers with the best investors.
Live with passion and fun,
Brett