London's housing industry faces a 'troubling picture' as number of new build starts drops
London's housing industry was facing a "troubling picture" as new build starts and sales growth have fallen at their worst rate since 2012, according to findings from London Central Portfolio's April LCPAca Residential Index, EG's 2018 London Residential Market Analysis and the Office of National Statistics.
LCP revealed that annual new build sales had fallen 13.8% in Central London, with quarterly transactions plummeting to 88, and that growth in the Greater London area slowed from 25% to 5.2%, resulting in a fall in market share to 15.6% from the 20% seen a year earlier.
New build starts, the "truest indicator of market buoyancy", fell by 25.4% in Inner London in 2017, with the largest falls seen in Southwark and Tower Hamlets, 61.8% and 43.3%, respectively, despite seven of London's eleven boroughs seeing an increase in applications of 4%, the largest of which at just over 42% coming from Wandsworth and Westminster.
Planning permissions also fell by 7.4% and completions by 6.1%.
New build starts fell by 1.1% despite a 25.8% increase in Outer London and planning permissions also fell by 1% and completions by 3.4%.
Average prices in prime Central London fell 12.7% over the year ended 30 April, however, outer London saw a "more robust performance", with average prices increasing by 8.5%.
Nevertheless, average prices of new builds in London as a whole dropped 2.6% year-on-year.
Tower starts, residential buildings of more than 20 storeys, dropped from 46 in 2016 to 32 in 2017, resulting in units started falling 33% to 5,500.
Tower applications fell almost 10% from 74 to 67, with far fewer in Zone 1 than previously as a conspicuous migration of towers from the centre to the periphery of the capital continued, with 30% of total towers intended for London's rental market being erected out of the centre, compared with 0% just five years ago.
Naomi Heaton, LCP's chief executive, said, "ONS data just released for the first quarter shows the construction sector suffering its worst performance since 2012, with private housebuilding shrinking for the first time since June last year. The sector contracted at its sharpest rate in just over five years, with output falling by 2.3% compared with the previous three months. Whilst the 'Beast from the East' has shouldered much of the blame, in truth, it was already suffering."
"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," Heaton added.