Politicians keep banging on about building more “affordable” homes for Brits but it looks like what we really need is to nail down what exactly counts as “affordable.”
Developer Telford Homes, which focuses on “non-prime” areas of London, on Wednesday declared in a trading update that with average prices “comfortably below £600,000” its apartments are “relatively affordable.”
To who exactly?
The average Brit earns around £24,200 in a year, according to Office for National Statistics figures from January. It’s slightly higher in London, with an average salary of £30,000 according to the Evening Standard.
But a couple both on the average London wage would still need to borrow close to 10 times their combined earnings to buy one of Telford’s “relatively affordable” flats — not even a house. (The average London house price now stands at £551,000.)
Still, Telford isn’t having trouble finding buyers at that price. The developer points to the success of its Liberty Building on the Isle of Dogs, a former industrial area near Canary Wharf.
The company says: “In the last four weeks, the Group has secured over £40 million of future revenue at this development with 68 of the 105 open market homes already sold.”
That works out at an average price of £588,235 for each flat or £900 per square foot, which Telford says is “at the upper end of the Group’s normal price range and ahead of initial expectations with no abnormal incentives having been required.”
So who are these mystery buyers that can shell out top prices for new build flats?
Telford says: “A third of these sales were to UK investors and the remainder to international investors in Hong Kong and China, with 33 sales in the latter representing the Group’s best result to date.”
Asian investors have been buying up £1 million plus homes in London for the last 5 years, most notably at the redeveloped Battersea Power Station. But recent changes to Stamp Duty that make it more costly for people to buy houses in that price range have pushed overseas investors into lower price brackets.
Or as Telford puts it: “The net effect of recent stamp duty changes having limited impact on sales of more affordable properties.”
In fact, the increased demand for “affordable” properties means Telford “no longer expects there to be a dip in profit levels in the year to 31 March 2017, an issue originally created by planning delays.”
It also raised its profit forecast for 2019 to £50 million. Forward sales mean the company has already bagged 50% of the revenue it forecast over the next 3 years.
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