News: Rich investors splash cash on top end flats but where are the tenants?

Tue, 19 Nov 13

London’s private rental market faces an over-supply of high-value homes for rent, and an under-supply of cheaper properties.

Savills says developers are rushing to build schemes aimed at soaking up foreign investment flowing into the capital. Many buyers will be renting their properties out –but could face a dearth of tenants with sufficient budgets.

According to Savills, more than £7bn of international cash was spent on high-end London homes last year, while just 20% of purchasers of such properties are from the UK, and two-thirds of buyers are investors rather than owner occupiers. London faces a 50,000-a-year shortfall in new homes, the Savills research says – however, the shortfall is entirely at the lower end of the market.

Enough properties are being built to satisfy the top end, defined as homes worth more than £1,000 a square foot, and which deliver an average monthly rent of £5,000 for a two-bedroom flat.

The emphasis on high-end property schemes is set to grow, with several major housing schemes due to come on to the market on the fringes of London’s prime territory, pushing high values into less fashionable neighbourhoods.

These include the conversion of the South Bank Tower in Southwark into residential apartments.¨

But any further supply may not find demand from tenants, warned Susan Emmett, Savills’ director of residential research.

She said: “Some of that stock justifies the price, but we are worried that not all of it will. “Since the recession, developers have moved upmarket, targeting buyers who are cash-rich, so we have seen a disproportionate amount of building at the top end [of the market].

“A lot of the buyers are foreign investors looking to rent it out, and we are questioning whether there is the level of demand for rental properties at that price level.”

See also: London Rents

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