London developers sold nearly 40% of stock to BTR sector in Q2

July 19, 2018 / Isla MacFarlane
London developers sold nearly 40% of stock to BTR sector in Q2

As the sales of new homes continues to fall in the capital, new data suggests that housebuilders are off loading stock to corporate landlords, making the BTR sector more instrumental to sales than Help to Buy.

The number of new homes sold in London during Q2 2018 was significantly down on Q1 2018, according to data from Molior. However, Build to Rent (BTR) now forms a major component of sales, accounting for two fifths of deals during Q2 2018.

When BTR is removed from the picture, sales to other forms of buyer fell by more than a third between Q1 and Q2 2018.

Help to Buy is often touted as the saviour of the new build market, however the research indicates that BTR is now more instrumental to sales than the government scheme, accounting for 39% of new build sales in London in Q2.

Molior analysed the sales in 32 London developments, where half of all sales in the capital were concentrated in Q2. Although Help to Buy hogs the headlines, the research highlights the diversity of disposal routes currently being taken by developers.

In 11 developments, the sales were accounted for by BTR – including in-house starts by BTR specialists, bulk purchases and last-minute decisions to rent rather than sell. The BTR companies involved include the likes of Greystar, L&Q PRS, M&G and Quintain.

In nine cases, Help To Buy is said to have been a key factor of success and a wide range of developers are deploying the incentive, from prominent names such as Barratt and Bellway to more niche players like London Green. Six schemes have sold well without any of the assisting factors described above – three of these are Berkeley Group projects.

So, in this rough and ready snapshot, Help To Buy has been relevant to only a quarter of the schemes, while BTR has been the driver in about a third of sales. Less than a fifth are getting on with no assistance

Jean-Marc Vandevivere, CEO at PLATFORM_, said, “The statistics released by Molior showing that more London housebuilders are looking to the rental market to secure an exit by selling to build-to-rent investors or housing associations should not come as a surprise: this allows house-builders to de-risk their larger schemes, especially in the context of weakening demand from owner-occupiers due to affordability issues, even though they benefit from very low interest rates and subsidies such as Help to Buy.”

If half of all sales were in 32 projects during Q2 2018, the other half were spread across 661 developments. Many of these 661 schemes had difficulty in making any form of sales progress during the last quarter, while a few have moved in reverse.

5,200 new homes sold in London, compared to 6,500 during Q1, and a quarterly average of 5,500 during 2016 and 2017.

Vandevivere said the research calls for a rethink about how mortgage debt impacted the wider economy and suggested the rental market will head the same way as student accommodation.

“As a society, we need to think about the wisdom of burdening people with high levels of debt, especially when mortgages tie people to a particular location for a prolonged period of time, hindering labour market mobility and in turn productivity. There is a growing recognition one of the key advantages of renting is flexibility – a major benefit in today’s footloose, globalised economy.

“Certainly the poor quality of the existing private rented housing stock – as outlined recently by the English Housing Survey – is why many still aspire to buy but with a new breed of corporate landlords looking to offer a bespoke product, perceptions will change, much like they have in student accommodation, which is no longer just associated with overcrowded HMOs or ageing university halls.”

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