JLL Residential

Encouraging signs of growth in the Central London residential development market

As pricing holds firm and sales and new unit starts increase

LONDON, 19 September 2017 — The Central London residential development market has proved remarkably robust during the course of 2017 and has even staged a mini recovery. Prices have held firm during 2017, the number of sales has increased slightly and the number of starts has also risen. There are encouraging signs for future development activity, with the number of new planning applications remaining relatively stable Q2, at least in Outer Core locations.

Sales market

• The number of sales in the first half of 2017 was 17% greater than the second half of 2016, boding well for the remainder of the year and into 2018

• Activity in Core markets has remained firm accounting for 49% of all Central London sales

• Pricing has stabilised during 2017 with no further price falls recorded since the discounting in 2016

• Demand for Central London apartments has remained solid during the course of the year as the number of unit launches continues to slow, down 18% in the year to Q2 2017 compared with a year earlier

Development market  - A tale of two halves as new unit starts, units under construction and new completions are at record levels whilst the planning pipeline is shrinking, especially in core markets.

• New unit starts rebound to 3,280 in Q2 2017, on a par with levels witnessed in 2013, 2014 and 2015, an encouraging sign that developers are happy to maintain this higher volume of delivery

• There are more than 36,000 units under construction, almost four times the number in 2011 following the boost in starts coupled with fewer completions in Q2

• The number of completions exceeded 3,000 units per quarter and 10,000 units per year during the first half of 2017 which is by far the highest level of completions in the past six years

• Planning applications have slowed over the past two years but a rebound in Q2 has led to an uptick in the annual total. However planning data highlights a growing divide between Core and Outer Core markets, raising serious questions about the level of Core development activity in the years ahead.

Adam Challis – head of residential research at JLL concludes: “The outlook for the Central London development market is more positive than we might have expected given the economic and political headwinds. This bodes well for the next few years as these uncertainties begin to fade. It is encouraging that developers are continuing to build, albeit with caution. Pressures in the land market will weigh on activity in central Core locations.

We expect the next 2-3 years to be unremarkable in terms of sales activity. Set against expectations, market participants will be happy to accept a relatively subdued but robust marketplace with the potential for sustained growth as we enter 2018.”

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