UK to have more new homes in 2012, but there is a shadow over future delivery
There has been a sharp decline in the number of new housing developments starting in the UK, according to Drivers Jonas Deloitte’s latest London Residential Crane Survey.
Only 35 new schemes have been recorded since the last survey six months ago, a significant fall from the 81 new schemes this time last year and 55 six months ago.
Activity at these new schemes comprises approximately 3,700 units, roughly half the number reported six months ago.
The survey also highlights a focus on the Inner London boroughs, which accounted for around 75% of the new units underway, with particular activity in boroughs such as Lambeth and Wandsworth. Inner London boroughs will deliver 52% of the total units currently under construction.
Although new activity is slowing, there is a rising number of schemes currently progressing to completion, as a result of the rapid pick up in new starts recorded 18 to 24 months ago. This survey saw 7,300 units complete, up almost 50% from the last survey.
‘While schemes started in the more buoyant 2010/11 period are now progressing through to delivery, meaning current completion levels are looking more healthy, this latest research shows a clear decline in the number of new schemes starting. While it is too early to call this slowdown in new activity a clear trend it does reflect the unease in the wider London residential market,’ said Anthony Duggan, head of research at Drivers Jonas Deloitte.
‘Our data shows that developers are focussing their activity on the more resilient Inner London areas, which is indicative of rising caution with regard to the health of domestic buyers and also the continued confidence in the prime markets and overseas buyers,’ he explained.
The regional split in activity is not uniform, however. East London is still dominating residential construction activity, accounting for 30% of total units under construction. The South West has seen the largest increase in activity, with total units underway rising by 8.5% over the past six months, while the West also saw a smaller increase. In contrast, both the South East and North have seen sizeable falls in the number of units under construction.
‘London remains a two tier market with developers continuing to focus on the Inner London boroughs. There appears to be a resurgence in West and South West London as a number of larger schemes have broken ground,’ said Mathew Evans-Pollard, head of London development at Drivers Jonas Deloitte.
‘Sales values seem to be holding up in central London and although there remains strong demand from international buyers, there are signs that parts of the Asian investment market is starting to slow,’ he added.
The research also highlights a growing concern of Londoners , the continuing lack of availability of houses, as opposed to flats. Ten years ago, houses accounted for more than 25% of new residential stock in London but the research shows that in the last six months, only 5% of units in newly started schemes are houses. This reflects that three quarters of new starts are in Inner London, where space constraints and land prices often make flats more viable for developers. The mix of private and affordable houses is fairly balanced, unlike in previous surveys.
‘The slowdown in new starts is unlikely to impact the market in the short term with 2012 and 2013 having a large volume of committed construction activity. Indeed, completions are expected to increase from their 2011 low in 2012. However, if the volume of starts remains low over the next survey period, as we suspect it might, the recovery in completion levels may be relatively short lived as the lack of new schemes starts to bite,’ Duggan concluded.