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Residential Developers Face Tough Time in London

LONDON-A new report from FPDSavills highlights the pressure facing the central London development market. In particular the disappearance of investment purchasers is forcing developers to focus on the owner-occupier market.

By Graham Parker | Updated on June 18, 2003

LONDON-The withdrawal of investment purchasers–traditionally accounting for between 50% and 70% of all stock sold each year–has put the central London residential development industry under pressure, according to new research from FPDSavills.

And there could be worse to come, according Richard Donnell, author of the report. “Poorer prospects for capital growth, low yields and a weak rental market lead us to believe that that investor demand will fall back sharply over the coming year,” he said.

Fewer investment buyers means that developers will need to focus on owner occupiers as the key source of demand. A choosier, more price sensitive breed, they buy later into a development’s life than the investor and this is set to have an impact on developers’ cashflows, especially at a time when marketing costs and the use of sales incentives are on the increase.

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