Residential Forecast Report Building Foundations November 2015

About the Report

Policy and action

The Central London development market is showing signs of caution while it braces for the Mayoral election and the EU referendum.
Policy intervention has led to a tipping of the scales in favour of owner-occupier buyers but this is creating uncertainty for some developers and has led to a slowdown in starts.
The overriding conclusion from this research is a concern that new supply will slow as a function of policy intervention rather than rise as it needs to meet demand.

Transactions slow

The number of transactions in the new Central London development market has slowed during the second half of 2015 as new stamp duty rules as well as London Mayor and EU votes dampen market vibrancy.
Overall, prices have increased both throughout 2015 and during Q1 2016, but price growth is highly dependent on location. Prices have fallen notably in some of the more expensive Core submarkets but have risen in excess of 5% pa in a couple of less expensive Outer Core markets.
Some developers are being flexible in their approach to changing market conditions and are typically reaping the rewards. Others are being less flexible and are often less successful in terms of sales rates.

Starts begin to slow

The development market looks set to slow in the short-term despite the number of units under construction soaring to new levels.
There are now more than 33,000 units under construction, a figure that has ballooned threefold in just three years. The East and South East submarkets have been joined by Canary Wharf to create a strong eastern bias to development activity.
Significantly, the number of unit starts fell slightly during H2 2015 despite a notable increase in Canary Wharf, perhaps signalling the end of the upward march in starts since H2 2011.
A further sign that developers are becoming more cautious is that the volume of units being applied for through planning has dropped in H2 2015. In the year to H2 2015, 18,640 units were applied for, 30% fewer than in the preceding year.

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Will McKintosh
Joint Head of Residential, MENA
+971 4 426 6911

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