Spotlight on London’s Housing Supply: Land, Sales & Completions, Where are the Gaps

Key Findings include:

London’s Housing Supply

• Starting point for the research is that the housing supply in London is currently a third below the Mayor’s minimum target – which is at the lower end of estimates of future housing demand.  Other think tanks suggest an even bigger shortfall of up to 50% below target
• The shortfall in London is AT LEAST 10,000 homes per annum against a backdrop of a rising population
• The forecast for the next 5 years shows that we expect a delivery of 66,500 homes which means a short fall of 50,000 homes
• Having reviewed the prospects for development and phasing of 2,250 sites across London with a capacity of 500,000 units for market sale.  Of these we expect only 600 sites to deliver new homes over the next 5 years
• More than half the supply pipeline is locked in sites of more than 500 market units – these big sites are harder to unlock as they require significant investment against a backdrop of scarce development finance
• We ask if investment in transport infrastructure and the growth of the private rented sector are the keys to unlocking further delivery of  the bigger sites

Market Segments

• The greatest shortfall is in the lower mainstream market (values up to £450 psf). This sector accounts for just 20% of supply vs more than 60% of London’s households with an income of less of less than £70,000
• Compared with past completions there is also an on-going scarcity in the mainstream (values up to £450 - £700 psf)  and prime sectors (values up to £700 - £1000 psf)
• The supply of new developments in the super prime (£5m +) is set to more than double.  In an expanding market there are precedents for this level of market absorption.  In 2006/7 25% of the new build market share was in the super prime segment.
• Many of these sites being delivered into the prime markets during the next 5 years are in riverside locations – capitalising on views, open spaces and added services – and therefore will have a differential from the bulk of the second hand market

Outlook

• Continued housing scarcity in London supports our forecast of 19% house price growth in London over five years – including 23% in Prime Central London.
• We expect housing demand to continue to outstrip supply because of employment growth, above average income generation and London’s global city status

Read the Spotlight on London’s Housing Supply full Report