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.”

Wider UK Region Construction cost per property 2 Year Growth (%) Average price 2 Year Growth (%) New-build mark up (%)
North (North East and North West) £151,366 4.4% £209,982 5.0% 38.73%
Scotland £150,213 5.2% £218,927 7.3% 45.74%
Central (East of Eng, East Midlands, West Midlands, Wales) £153,301 5.8% £286,959 5.7% 87.19%
South (South East and South West) £186,708 4.5% £352,150 4.5% 88.61%
London £250,148 4.6% £505,141 2.4% 101.94%
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