LCP’s latest LCPAca Residential Index found that new build sales are falling 13.8% in Prime Central London. Sales in Greater London have also slowed, with growth falling from 25% to 5.2%, resulting in a fall in market share to 15.6% from 20% a year ago. These concerning findings have now been verified by an analysis undertaken by LCP of new build data from the latest LOREMA report for 2017.
In Inner London, new build starts fell by 25.4% in 2017, compared with 2016. The largest falls were recorded in Southwark, with 61.8%, and Tower Hamlets, with 43.3%. Applications increased by 4%, even though there were falls in seven of the 11 boroughs with the largest at just over 42% in both Wandsworth and Westminster. Moreover, planning permissions also fell by 7.4% and completions by 6.1%.
“Findings from LCP’s April LCPAca Residential Index, LOREMA’S 2018 report and the ONS all show a troubling picture for the new build sector in London,” said Naomi Heaton, CEO of London Central Portfolio (LCP). She argued that these findings prove the construction sector is suffering its worst performance since 2012. Although the ‘Beast from the East’ contributed to its fall, the sector was in trouble even before that. According to the ONS, a large portion of the fall was due to a sharp 2.6% decline in January.
The report shows that tower starts dropped from 46 in 2016 to 32 in 2017, resulting in units falling at 33%, from 8,200 to 5,500. The applications also fell at almost 10% from 74 to 67, with far fewer in Zone 1 than previously.
Naomi stated that a downturn in international buyer sentiment contributed to the fall of the new build sector. “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.”
“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,” Naomi concluded.
