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London’s housing supply: Where are the gaps?

The forecast for the next 5 years shows that Savills 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 the firm 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.

Savills 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.

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.

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

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