Prices slashed on new homes

The London property market is awash with thousands of bargain new-build homes after sluggish winter sales, a report claimed today.

The prices of some developments have fallen by more than a third in the past year, according to industry analyst group London Residential Research. The glut of unsold new homes, including multi-million-pound penthouses and riverside pied-à-terres, may be a "horror show" for developers but will provide rich pickings for investors.

More than half the new-builds completed in the capital last year, some 8,500 properties, were still on the market at the end of December at much reduced prices, in contrast to the booming housing market of 2007 when only six per cent failed to sell.

The report, Residential Development in London 2009, said all tiers of the market were affected. Developers are still trying to sell a £355,000 one-bedroom flat in Battersea, opposite

Chelsea Harbour, which was completed last year, a two-bedroom flat on the 36th floor of a development in the Isle of Dogs and a £435,000 two-bed flat in a conversion development in Acton.

The study said: "Developers were hit from both ends. Rising production at one end and falling sales and rising cancellations at the other created a tenfold increase in what might be regarded as the normal level of unsold or unlaunched stock."

Analysts say the window for bargain property could be small, predicting price rises in 2011. Although the level of unsold stock will rise to as high as 10,000 this year as a surge of developments reach completion, the supply of fresh stock is likely to dry up, pushing up property values.

The shortage is down to developers going into "hibernation" during the recession — construction stopped on as many as 100 schemes in the capital last year. The number of home-building projects fell by 43 per cent compared with 2007. The National Housebuilding Council said only 171 properties were started in London in February and 170 in March.

Brian Green, editor of The Red Book, said: "I think that those in the business will look back at 2008 as the year when the world changed."

London estate agents are convinced that house prices have touched the bottom in some parts of the capital after a marked shift in the market's mood. Buyers are getting back in, leading to the return of gazumping, sealed bids and non-returnable deposits.

Mortgage lending also jumped in March, fuelling hopes that the bounce may lead to a sustained recovery. Last year the number of house sales collapsed by two-thirds and prices fell by about a quarter from the pre-credit crunch 2007 peak.