The number of new homes built in London will reach record levels in 2017, although completions are about to peak.
New research from Savills forecasts total net completions (including sub-market and intermediate housing provision) will peak at 46,500 this year, ahead of the minimum 42,000 homes a year target set by the London Plan and up from the 41,000 homes estimated to be completed in 2016.
This figure is still well short of real housing demand, though, which Savills puts at 64,000 homes per year. Indeed, while the majority have sold off plan, more homes will complete unsold this year than at any time over the past decade, as what is being built currently does not match the shape of demand: Savills estimates that 58 per cent of demand is for homes costing less than £450 per square foot, which accounts for just 15 per cent of the five year build forecast.
Over the past five years, private housebuilding starts have raced ahead of completions, supported in large part by rising volumes of off-plan sales, which assist cash flow and give certainty to funders and are therefore vital to the current delivery model. However, over the next few years, private sector completions are forecast to fall sharply, the result of rapidly falling home starts, as developers adjust to lower rates of sale. Policy intervention is required, Savills says, in order to reach the level of development needed and shift the focus to the lower-value end of the market.
Sales have started to slow, meaning more homes will remain unsold on completion, particularly in the prime market. Between 2013 and 2016, 13,500 more homes were started than sold and Savills estimates that unsold, finished homes will total 2,800 this year, up from 1,000 last year.
Since the peak of 2015, development starts have fallen sharply. Savills expects starts to total just 21,500 this year and fall to 18,000 annually over the next two years. In turn, completions are forecast to fall to just 18,000 by 2021. While this will allow high levels of supply in the private market to be absorbed, assuming sales rates are sustained at 2016 levels, it will leave London chronically undersupplied in new homes.
“To a large degree, the fact that London almost hit its official new homes target last year should be seen as a massive success, but these figures suggest we are at the limit of what can be built under the current delivery model,” says Edward Green, Savills research analyst.
““This year may present some harsh realities for a number of developers, but the bigger issue remains that of a city chronically undersupplied in the homes it desperately needs. An additional model for housing delivery is needed, that adds to the output of major housebuilders and the market sales model.”
Small and medium new build schemes dominate London’s pipeline
6th March 2017
Small and medium sized developments (SMDs) account for two in three new build schemes in London’s pipeline, but will only provide one in five of the properties, according to research from Kinleigh Folkard & Hayward (KFH).
The research shows there is currently a total of 1,031 private new build developments (all more than 20 properties per development) either awaiting planning permission, with planning consent awaiting construction, or under construction. These schemes will provide a total of 214,875 properties – the equivalent of 17 years of housing delivery in London (based on the average number of private homes completed per year in London over the last five years).
However, the analysis shows that while SMDs account for the majority of schemes in the planning pipeline (66%), with 41,878 individual properties between them they will only provide a fraction of the overall number of properties in London’s pipeline (19%).
John East, Director of Land and New Homes at KFH, comments: “The Government’s Housing White Paper makes clear that small and medium sized developments are vital for London to meet its housing need. Our analysis proves that more has to be done to support developers at the smaller end of the scale. Making more land available for these developments and accelerating the construction of sites that already have planning permission is a start, but securing consent will remain a challenge where there are local sensitivities.”
First Starter Homes to be built in UK this year
3rd January 2017
The first of the UK government’s flagship Starter Homes will be built on brownfield sites in the UK this year.
The scheme, which is a central part of the Conservative government’s plan to tackle the country’s chronic shortage of housing, was first announced back in 2014, with the aim of offering first-time buyers between 23 and 40 years old a home at 20 per cent below market value.
At the start of a new year, the government has now confirmed that the first wave of these new homes will be built on brownfield sites across the country.
“One in three councils has expressed an interest to work with us so far,” says Housing Minister Gavin Barwell, with 30 local authority partnerships selected on the basis of their ability to build the homes quickly.
These partnerships have been established under the government’s £1.2 billion Starter Homes Land Fund, which supports the development of starter homes on sites across England.
The first places will begin construction later this year, along with sites supported by the Homes and Communities Agency.
In addition, the Homes and Communities Agency has also today issued a call seeking expressions of interest from local authorities who are interested in using their land to deliver homes at pace through the £1.7 billion accelerated construction recently announced. This will see up to 15,000 homes started on surplus public sector land this Parliament.
“This government is committed to building Starter Homes to help young first time buyers get on the housing ladder,” adds Barwell, although there have been some criticisms that the market value of properties is so high in some areas that the 20 per cent discount will still leave some Starter Homes prohibitively expensive. Nonetheless, they are included in the government’s target to build hundreds of thousands “affordable homes” in the coming years.
“It’s great to see the Housing Minister kick off 2017 by giving the green light to the first Starter Homes,” comments Brian Berry, Chief Executive of the Federation of Master Builders.
“These are positive messages to start the year with and they show that the Government is putting house building at the front and centre of its ambitions for 2017. With a Housing White Paper expected in the next few weeks this will be an important year for housing policy and its success or failure will be a key part of the new PM’s legacy.”
However, Berry warns that Starter Homes “will not be a panacea”, calling for a “wider set of measures aimed at increasing the capacity of the house building industry”.
“Central to this must be getting small and medium-sized (SME) builders delivering more new homes,” he continues. “For instance, the announcement of 14 ‘garden villages’ and more garden towns needs to be backed up by implementation plans which provide opportunities to SME builders as well as the large companies.”
Mark Hayward, Managing Director of the National Association of Estate Agents, also welcomes the news, but warns that “we need to see these plans put into swift action”.Google+