According to Drivers Jonas Deloitte’s latest London residential crane survey, there has been a 32% rise in residential schemes under construction in the capital. The number of units under construction within these schemes has risen 25%, bringing the total units to 35,380 - up from 28,150 six months ago and 25,800 a year ago.
All London sub-regions have seen an increase in units under construction, with North London seeing the biggest increase in new activity with almost 3,000 units commencing. The East remains buoyed by activity at the Olympic site and continues to see the most activity overall with almost 10,000 units currently under construction.
Drivers Jonas Deloitte partner and head of planning and development Clive Pane said: “The detail of the survey shows that construction starts are up, which is ‘good news’ of sorts, but good news coming from a market that was in shut-down mode during 2007/08. This shows through in the completions around London, which our survey shows are now at an all-time low. The bigger picture is that supply is running at around half of London’s stated need of 30,000 units per annum plus and, as the impact of reduced affordable housing grants kicks in, I expect supply to remain at this or even lower levels in the future.
“In terms of pricing, what this means is that we will continue to see firmer pricing in Greater London than the main forecasters predict. Analysis shows that most forecasters have consistently under estimated the impact of supply shortage on growth rates. This year is no different. So in a year when 12 months ago most people were predicting price reductions, we have seen firm growth – 5% plus - in most parts of London.
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“The long term implication is straight forward. As soon as the currently tight monetary conditions ease, and they will, we will move back towards historical growth rates for London, which have averaged a little under 10% per annum over the last three cycles since the war.
The developers’ favoured unit type is unsurprisingly still flats, the majority of which have two bedrooms. Studios account for just 3% of units under construction, while the share of houses has risen slightly, to 5%.
The survey warns that completions have collapsed by 40% as the lack of new starts during the depths of the recession is now translating into a reduced level of completions. Consequently, over the past six months only 3,970 units have been delivered across 38 schemes, significantly below the 6,600 completions reported in the last survey. However, pipeline figures suggest that 2010 will have been the low point in this cycle, with a modest uplift in completions expected for 2011. Current pipeline data for 2012 reveals that completions could be in line with, or even exceed, levels seen before the downturn. This would be welcome news for the construction sector which will need to refocus its resources following the completion of the London 2012 construction projects.
Pane added: “The private sales market in London is still being dominated by overseas investors. More than 60% of new homes sales in Central London are to overseas investors, primarily in the Far East. Recent changes in the currency markets mean that investors in Singapore, for example, can purchase London properties in sterling at the equivalent of a 30% discount, and there are currently no signs of this appetite waning.”
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