The developers of Battersea Power Station are supposedly considering downsizing the size of many units amid rumours that these are struggling to sell. This follows research last year that revealed that there are far more luxury flats being built in London than have sold historically, leading many to predict a glut of large, high value properties that will struggle to sell. To those within the lettings industry, these headlines come as no surprise as they have long known that smaller, less expensive properties see the strongest demand even during boom period.
Developers across London are now re-examining the final phases of many schemes that were expected to include three and four bedroom apartments and penthouses. With the slow down at the top end of the market and a oversupply of luxury properties, many developers are considering lowering the specifications or carving these larger apartments into one- and two-bedroom units. These will sell more quickly and crucially, those bought for investment will let more quickly.
According to Benham & Reeves Residential Lettings’ own statistics, 49% of all flats let across its 15 London offices have been two-bedroom apartments. One-bedroom units constitute 22% of all transactions, studios 11% and the remaining 18% are apartments and houses with three or more bedrooms. These statistics are unsurprising when compared to the ONS research from 2013 that showed that 38% of rented households are occupied by just one person.
“The problem is two-fold,” explains Marc von Grundherr, Lettings Director at Benham & Reeves Residential Lettings, “Firstly, the top end of the market was booming so naturally developers started building luxury properties. No block of flats was complete without one, two or three multi-million pound penthouses, not to mention other high end developments in prime areas where the starting price was £1m. Now that these properties are finally hitting the market, demand has dried up.
“Secondly, this isn’t Hong Kong or Manhattan. British families tend not to live in large apartments but in houses. Flats are for individuals, couples and downsizers. Even when we get a family asking for a larger property, they’re often renting while they look for something to buy or while they’re renovating their principle property. Developers and especially planners need to recognise where the demand is. It’s for smaller units that let more easily and these units are also the ones in demand by owner occupiers.”