Glut of overpriced properties in London driving up land costs

But is demand for premium property matching supply?

A race to build homes in London’s flashiest areas is driving up the cost of land and hitting developers’ pockets.

According to the FT, in some of the capital’s most expensive areas, roughly 54,000 new homes are either planned or already under construction.

This effect has created a jump in the value of residential development land. Prices went up by almost a quarter over 2014.

Many of the homes built in these areas are done so with a view to attracting buy-to-let landlords, and the vast majority will cost in excess of £1m.

But will demand for these properties match the surging supply?

Research by data company Lonres, researchers Dataloft and buying agents PropertyVision has revealed that over 2014, just 3,900 homes worth more than £1m were sold in the same area – stretching from Chelsea to the City.

“Unsophisticated” buyers

Property Vision founder Charlie Ellingworth, said that many of the homes in these developments were two-bedroom apartments in tower blocks, and are being sold to “unsophisticated” foreign investors, the FT reports.

“It is unlikely that investors are going to see the sort of yields that they have been led to expect,” he said.

“The pool of buyers may extend to the whole of China, but the pool of tenants is pretty static.”