Barratt cuts price of £1m-plus London homes

One of Britain’s biggest housebuilders has started cutting prices on some of its most expensive London homes because of waning demand at the top end of the market.

Barratt Developments said that although overall market conditions were healthy, it was proving more difficult to sell homes priced above £1m in the capital because of too much supply.

David Thomas, Barratt’s chief executive, said: “Market conditions in London at higher selling prices remain more challenging. To mitigate these risks we have taken pricing action on a number of our sites in London.”

Activity at the top end of the London housing market has fallen since the then chancellor, George Osborne, overhauled stamp duty in December 2014.

Buyers have been deterred by the higher upfront costs of homes priced at more than £936,000, and sentiment has not been helped by the uncertainty surrounding the UK’s Brexit vote. Recently, estate agent Strutt & Parker reported that the number of sales in prime parts of central London had fallen by 47% between the summers of 2015 and 2016.

Barratt has 385 sites in the UK, about 20 of which are in London, with six or seven classed as higher-end in the capital. Thomas said the company was lowering prices by about 5% to 10% on a few of its most expensive, centrally located London sites in zones one and two.

He said that in another move to “de-risk” its London portfolio, Barratt had exchanged on a “build and sale” agreement, selling a whole development of 39 apartments for £47m. Under such an arrangement, a housebuilder would sell at a reduced price, but avoid the cost and uncertainty of running show homes and offices from the new development.

In a trading update for the period between 1 July and 13 November, Thomas said that more broadly the Brexit vote had not dampened consumer demand for new homes, largely because of good mortgage availability and a national housing shortage.

“This has been another good trading period for the group. Consumer demand is strongly supported by good mortgage availability. We are mindful of the potential for economic uncertainty created by the outcome of the EU referendum. However, market fundamentals are robust, and we remain a housebuilder of choice.”

Forward sales over the period rose by 4.3% to £2.56bn, which was equal to 11,733 plots. Barratt said sales rates were weaker in London compared with the same point last year, but were strongly up in the northern and central regions.

The housebuilder said it had taken a cautious approach in the immediate aftermath of the referendum, buying fewer sites than usual for the time of year, but it was on track to meet its full-year targets for land ownership.

Earlier in November, rival builder Persimmon said it had seen “encouraging” trading since the referendum and activity had risen in autumn, but added that uncertainty after the Brexit vote had made it cautious about purchasing new land.

Thomas said Barratt was taking a “business as usual” approach following the referendum. “[The UK is] not building enough homes, so there is an opportunity for us to increase building and housing supply,” he added.

Some developers have offered incentives to buyers of prime London flats, with Barratt meeting stamp duty costs on some of its high-end properties, and giving rental guarantees to investors.

Barratt shares were the biggest fallers in the FTSE 100, dropping about 3% to 469p. Hargreaves Lansdown analyst George Salmon said the tone of the group’s trading update remained positive, but noted its concerns over the London market.

The capital “is particularly exposed to any damage a ‘hard Brexit’ could cause, and high prices mean that the government’s support [help to buy] is less of a factor,” Salmon said.

Henry Pryor, a buying agent for wealthy clients, said he was receiving calls from agents and developers “offering to help me and my clients ‘take advantage of some spectacular deals’.”

“It’s as if the Christmas sales have come early this year,” he said. “Developers of new-build properties have momentum, they have stock that will be ready come what may and they will be thinking very hard now about what they can do other than to slash the price.”

[Source:- theguardian]