http://www.bloomberg.com/news/2014-07-04/london-lenders-rejecting-homebuilders-as-cost-of-land-skyrockets.html
Surging land prices in London are prompting lenders to reject more requests from developers faced with slowing home-price gains and soaring construction costs.
“The biggest reason we turn down deals is because land values are a bit toppy,” said Randeesh Sandhu, chief executive officer of London-based lender Urban Exposure Group. “Usually the only way a developer can get the deal to work is to go back to the landowner and renegotiate the purchase price,” said Sandhu, whose company rejects 98 percent of approaches for credit on predominantly residential projects.
Central London residential land prices jumped about 26 percent in the 12 months through March, according to data compiled by broker Savills Plc (SVS), as government-backed loan programs for new homes and rising sales fueled demand for undeveloped sites. Land for offices there rose 4.4 percent in the same period. London homes, valued at about 30 percent more than the market’s last peak in 2007, are appreciating at a slower pace as more sellers offer properties and demand ebbs, property-website operator Rightmove Plc said in a June report.
“We do see people potentially overpaying for land,” said Chris Philp, chief executive officer of Pluto Finance, which specializes in providing high loan-to-value credit for housing construction. “There’s a shortage of land with planning consent to build on and that’s obviously feeding into higher house prices and higher land prices” in London, he said.
Surging land prices in London are prompting lenders to reject more requests from developers faced with slowing home-price gains and soaring construction costs.
“The biggest reason we turn down deals is because land values are a bit toppy,” said Randeesh Sandhu, chief executive officer of London-based lender Urban Exposure Group. “Usually the only way a developer can get the deal to work is to go back to the landowner and renegotiate the purchase price,” said Sandhu, whose company rejects 98 percent of approaches for credit on predominantly residential projects.
Central London residential land prices jumped about 26 percent in the 12 months through March, according to data compiled by broker Savills Plc (SVS), as government-backed loan programs for new homes and rising sales fueled demand for undeveloped sites. Land for offices there rose 4.4 percent in the same period. London homes, valued at about 30 percent more than the market’s last peak in 2007, are appreciating at a slower pace as more sellers offer properties and demand ebbs, property-website operator Rightmove Plc said in a June report.
“We do see people potentially overpaying for land,” said Chris Philp, chief executive officer of Pluto Finance, which specializes in providing high loan-to-value credit for housing construction. “There’s a shortage of land with planning consent to build on and that’s obviously feeding into higher house prices and higher land prices” in London, he said.
London developers’ profit margins are also being squeezed by rising construction costs as employment in the industry rises at a record pace.
Central London land prices jumped about 26 percent in the 12 months through March, according to data compiled by broker Savills Plc, as government-backed loan programs for new homes fueled demand for undeveloped sites.
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