London is building tens of thousands of luxury homes despite falling demand

35,000 new luxury homes are set to be built in London over the next ten years according to property consultancy company Arcadis.

This is a 40% increase in luxury constructions from 2014 and represents a combined sales value of over £77 billion ($110 billion).

However a slowdown in demand and a rise in development costs could result in many residential luxury properties being turned into commercial offices, according to Arcadis.

The north of England and the West Midlands could also see a rise in demand as buyers look elsewhere for cheaper homes and investment opportunities.

This may help stem the increasing North-South property divide, which Business Insider previously reported on.

The chart below shows the total number of London homes currently in the pipeline:

The last couple of years have seen a significant slowdown in luxury properties in London, with prices in the wealthiest areas dropping 6.7% since 2014 and unlikely to grow in 2016. Many are putting this down to a rise in the stamp duty tax, which came into effect at the beginning of April.

This still hasn't slowed down the capital's lust for major developments - a New London Arcitechture report shows that a record 436 tall buildings over 20 storeys are currently being planned and constructed.

But there are signs that the property slowdown could become a full blown crash. In February property funds saw an outflow of £119 million, a huge turnaround from a year ago when they were one of the most popular asset classes on the market.