Construction in London will be unable to keep up with demand for residential stock between now and 2022. A new report from Knight Frank revealed that despite a substantial increase in development activity in many areas of the capital, the density - or lack thereof - of the construction pipeline suggests supply will fall short of demand levels.
This is due to household growth exceeding expectations, with DCLG projections showing a near 40 per cent rise in the number of new households created in the capital between 2011 and 2021. This equates to a total of 525,790. However, the total sale value of property currently planned for delivery between 2013 and the end of 2022 stands at just GBP 80 billion - the equivalent of around 277,240 new units.
Nevertheless, this isn't to say construction activity hasn't increased and in 2012 there was an uplift of 63 per cent year-on-year. Developers have also been encouraged by Help to Buy but supply is still constrained, particularly in central London boroughs. In these areas, pipeline data suggests that new units delivered will meet less than half of housing requirements.
However, Knight Frank has warned that developers still need to be conscious of pricing, despite undersupply. Properties in London are among the most expensive in the world and many people are forced into rentals due to high deposit requirements. Affordable housing is one of main priorities of the local government, with mayor Boris Johnson championing such schemes.
Grianne Gilmore, Knight Frank head of UK residential research, said: "There is widespread recognition of the housing shortage in the capital, with the Mayor pushing hard to encourage higher levels of development. While it is impossible for us to second-guess developers about when they will bring schemes forward, our judgements on schemes within the planning pipeline show that overall delivery will not match demand. However, we are not discounting ‘oversupply’ in some local areas – with delivery outstripping local demand as measured by our data."