London housebuilders are pocketing the biggest new-build profits

27th October 2020

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London housebuilders are pocketing the biggest new-build profits

Property developer StripeHomes has revealed that London new-build homes are currently selling for 102% more than the cost of construction, meaning new-build homebuyers in the region are paying the highest premium to the pockets of the capital’s housebuilders. 

In London, the average construction cost of a new-build home is currently £250,148. In the last two years, this cost has increased by 4.6%, the third-largest increase behind Scotland (5.2%) and the central regions of the Midlands, Wales and the East of England (5.8%). 

Over the same time, the price paid for new-build homes in the capital has increased by the smallest margin at 2.4%.  

However, despite this, housebuilders in the region are still seeing the largest mark-up between the cost of construction and the price charged to new-build homebuyers. The current average new-build house price in London is £505,141, by far the highest of all areas of Britain. 

As a result, London’s housebuilders are selling new-build stock at a 102% mark-up when compared to the average cost of actually building each home. 

In contrast, the North East and North West represent the best value for new-build homebuyers when it comes to the premiums charged and profits made by housebuilders in the area.  

The average overall cost of constructing a new build in the North is currently £151,366, having increased at the lowest rate in Britain over the last two years (4.4%). At the same time, the average price of a new-build has increased by 5%; the third-largest uplift in property values.  

Despite this, the average new-build house price is currently just £209,982, meaning housebuilders in the North are pocketing just a 39% mark-up when compared to the cost of construction. The lowest in Britain.  

Managing Director of StripeHomes, James Forrester, commented:

“Property development is a business at the end of the day and so no one can really blame developers for making a profit. However, it’s clear that this level of profit differs drastically from one area of Britain to the next, with London’s new-build homebuyers paying a far higher profit premium than elsewhere around the nation. 

It’s fair to say that the North is home to the most reasonable new-build balance between developer profits and homebuyer benefits. 
While the cost of construction has increased at a similar rate to elsewhere around the nation, the cost of building remains low.   

At the same time, the cost of buying is also the most affordable despite homebuyers seeing a good level of appreciation where house price growth is concerned. So it’s a win-win for all parties involved.” 
Table shows the average cost of construction for a new-build property, the average house price and the mark-up between the two
Wider UK RegionConstruction cost per property2 Year Growth (%)Average price2 Year Growth (%)New-build mark up (%)
North (North East and North West)£151,3664.4%£209,9825.0%38.73%
Scotland£150,2135.2%£218,9277.3%45.74%
Central (East of Eng, East Midlands, West Midlands, Wales)£153,3015.8%£286,9595.7%87.19%
South (South East and South West)£186,7084.5%£352,1504.5%88.61%
London£250,1484.6%£505,1412.4%101.94%
Sources:Property DataLand Registry 

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