These concerning findings have now been corroborated by an analysis undertaken by LCP of new build data from the latest LOREMA report for 2017.
A marked slowdown in Inner London**
- New build starts, the truest indicator of market buoyancy, fell by 25.4% in Inner London in 2017, compared with 2016.
- The largest falls were seen in Southwark (61.8%) and Tower Hamlets (43.3%).
- Applications increased by 4%, although there were falls in seven of the 11 boroughs with the largest at just over 42% in both Wandsworth and Westminster.
- Planning permissions also fell by 7.4% and completions by 6.1%.
- New build starts fell by 1.1% despite a 25.8% increase in Outer London.
- Planning permissions also fell by 1% and completions by 3.4%.
- Average prices in prime London have fallen by 12.7%.
- Outer London has seen a more robust performance, with average prices increasing by 8.5%.
- Nevertheless, average prices of new builds in London as a whole have fallen by 2.6%.
- Tower starts (residential buildings of more than 20 storeys) dropped from 46 in 2016 to 32 in 2017, resulting in units started falling 33%, from 8,200 to 5,500.
- Tower applications fell almost 10% from 74 to 67, with far fewer in Zone 1 than previously.
- Conspicuous migration of towers from the centre to the periphery of the capital, with 30% intended for the rental market compared with 0 in 2013.
“A downturn in international buyer sentiment has impacted the new build sector which remains the most volatile. According to the LCPAca Residential Index, there have been both quarterly and annual price falls in Prime Central London and a lacklustre performance in Greater London. It is quite possible new build transactions will continue to decline, particularly in Inner London, given the 25.4% fall in new build starts reported by LOREMA. This situation could well worsen over the next two to three years, as schemes under construction which fail to sell off-plan come to completion”.
Heaton adds “This may well impact developers’ desire to commence new build projects, resulting in a negative impact on the provision of new housing, one of the Government’s key aims. However, an increase in activity in Outer London may help mitigate this, particularly given the tower blocks being developed in the more peripheral areas of London, The fact that 30% of new tower starts are for the rental market compared with zero four years ago is also encouraging for the burgeoning generation of renters.”
** There are 33 Local Authority Districts in Greater London. Inner London includes Camden, City, Hackney, Hammersmith & Fulham, Islington, Kensington & Chelsea, Lambeth, Southwark, Tower Hamlets, Wandsworth, Westminster. The remaining 22 are in Outer London. LOREMA uses its own definition of Prime London.
LCP is a specialist residential property advisor focusing on Prime Central London. It has an extensive private client practice and has successfully brought multiple funds to market, capitalising on this sector.