Developer Telford Homes has announced record-breaking results – largely thanks to foreign and other investors, and to build to rent.
Sales achieved were split 28% to UK investors, 41% to foreign investors and 24% to institutional investors.
Just 7% of sales were to owner occupiers, who are either reluctant or unable to buy homes off-plan with deposits.
Telford sells homes off-plan, taking at least 10% as a deposit. Where sales are more than two years ahead of completion, it usually takes another 10% 12 months after exchange. As at the end of March this year, it had taken just over £70m of deposits.
The developer said: “The relatively low percentage of sales to owner occupiers is not a function of a lack of demand and is purely down to the timing of sales.
“The group aspires to forward sell its developments to de-risk existing projects and investors purchase much earlier in the development process than owner occupiers.
“By de-risking existing projects the group is able to advance investment into new projects and grow more rapidly.”
Telford Homes, which concentrates on the non-prime London market, reported pre-tax profits up 28% to £32.2m, and revenue up 42% to £245.6m.
The company’s performance was boosted by a move into the private rented sector and says it has been rewarded with “exceptional” capital returns.
It sold off two build-to-rent developments, one to fund manager M&G and the other to housing association L&Q.
This week it announced that it is partnering with M&G Real Estate to build a private rented development in Bow, east London.
Jon Di-Stefano, chief executive of Telford Homes, said: “There have been some recent and justifiable concerns over prime residential properties in London but this is a different market to that served by Telford Homes.
“The group is focused on desirable non-prime locations in London at a price point that continues to see strong demand.
“There is an ongoing housing crisis and a clear imbalance between the supply of homes and the needs of a growing population. Telford Homes is building homes for Londoners in a market where demand continues to significantly outstrip supply.”
Comments (1)
Off plan has never worked as a vehicle for owner occupiers. They want a home now, not in two years time. Even if they can buy at a discount.
Although it is interesting that UK investors still accounted for a larger proportion of sales than institutional investors. Expect next years results to show a 360 degree turn on that stat. These developers have to be careful not end up like suppliers to M&S. Eventually they will call all the shots including volume and price. With a quarter of their business already reliant on institutional investors then they are heading that way.