Demand for homes in central London property market picks up

Buyer demand in the residential real estate market in central London picked up during the early months of 2015, according to a new report.

The market is still busy below £1 million but has quietened between £1.5 million and £5 million as Stamp Duty changes and the possibility of a mansion tax take their toll, says the analysis from real estate firm JLL.

However, underlying demand is still strong and the fundamentals remain the same and an excess of demand over available supply, which continues to support the market.

The report also points out that development activity continues to rise with 26,500 units now under construction, a 23% increase during the second half of last year and a 41% rise throughout the course of 2014.

The majority of units underway are in outer core locations where there was a 34% increase in the second half of last year with core markets seeing a more modest increment of 8%. The number of units starts during the second half of last year, at 8,700, was a 45% increase compared with the first half of 2014.

According to JLL although the general election is now just a month away it has been impacting the central London sales market since 2014. For example, Labour's mansion tax proposal is affecting the market above £1.5 million as people adopt a wait and see attitude.

‘The general election does not seem to have deterred London's developers. The number of units underway has increased significantly over the past couple of years and the election is not halting this,’ said Neil Chegwidden, director in the residential research team at JLL.

‘It is also interesting to see that London's developers believe that the outcome of the general election is more important to their businesses than the Mayoral election next year. So it is good news that new supply is on the rise, but we continue to fall short of London's targets and it will be intriguing to see what impact a new government might have on this vital issue,’ he added.

The report also looks at the legacy of the 2012 Olympic Games on the east of London and says that 10 years on from the successful bid the East Village already has its first residents and construction is underway at Chobham Manor, one of five neighbourhoods within the Park.

It also says that this part of London has a wealth of development and regeneration potential that reaches far beyond the sphere of influence of the Olympic Park and the raised profile of the area is encouraging developers to bring schemes to the market.

Construction levels have escalated in recent years. At the end of 2013 there were just 2,900 private residential units under construction, now there are 6,600, a 125% increase. A quarter of all new residential units under construction are in East London led by the 6,800 units at Queen Elizabeth Park and the close to 6,500 units at Stratford City and accompanied by around 2,000 at East Village.

But not all the large sites are at Stratford. The largest non-Olympics schemes underway are Royal Wharf and Silvertown Quays which will both deliver in excess of 3,000 units, while London Dock, the News International site in Wapping and City Island will provide more that 1,700 units each. And whilst a huge chunk of the East's delivery will come from the larger regeneration sites there remains a solid pipeline of smaller schemes. Together they make up a pipeline of 32,800 units.

The report also points out that the East London sales market was the most active sub-market in London in 2014 with over 5,000 units purchased accounting for 51% of all outer core sales and 39% of purchases across central London. Prices rose by 7.5% during 2014, notably higher than the 5.9% central London average, and are predicted to continue along this trajectory in 2015.

‘East London has truly come of age and is accepted globally as a hotbed of investment for all types of property transactions. Regeneration and redevelopment are in full swing and some fantastic residential schemes are helping to transform and upgrade East London from Tottenham Hale down to the Royal Docks,’ said Max Wilkinson director in the City and East Development team.