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But how high will we dare to go?
London, 23 September 2015 – “London stands at the precipice of a monumental and defining stage in its evolution. Never before has it been viewed as such a modern, progressive and flamboyant city. It is renowned and revered for its history and tradition. But with more than a 10% increase in population over the next decade and a raft of new towers set to transform its skyline, London is set for a new era in its development.” Neil Chegwidden, Residential Research Director at JLL.
In the wake of the general election, the Central London Development market has divided into two - the sub £1.5m market remains strong and active with prices rising steadily with demand robust from both from domestic and international purchasers. The market above £1.5m is more sensitive as the effects of new stamp duty rates, which came into force last December, are playing an instrumental role.
The first half of 2015 has seen a notable drop in Central London unit launches with 6,700 recorded in H1 – a 12% decline from H2 2014 as developers held back given the uncertainties surrounding the general election in May. The number of unit sales slowed slightly as a result. There were, however, still 6,000 unit sales in H1, down from 6,400 in H2 2014, but this total was still 25% higher than the half-yearly average covering the preceding four years.
Price growth has eased to an annual rate of 1.4% across the whole of Central London, down from 5.9% pa at the end of H2 2014 and 13.7% pa at the end of H1 2014. Lower value properties and areas have seen more robust price growth over the past 6-12 months.
Development activity in Central London has increased with a record number of units under construction totalling 30,700, up 8% on H2 2014 and 18% in the last year. This has increased from 10,000 in 2011.
The planning pipeline shrank during H1 2015 with only 5,400 units applied for, significantly lower than the 17,300 during H2 2014 and below the longer term average. But it is also true that the total pipeline has increased significantly in recent years – rising from 74,300 units in H1 2011 to 118,400 now.
Chegwidden comments: “Construction activity continues to escalate but the planning pipeline has surprisingly shrunk during the first half of 2015. Over 60% of units under construction are in Outer Core submarkets with the East and South East regions accounting for over 40% of the Central London total. We continue to believe that construction activity will begin to ease a little over the next 12-18 months, so while developers have significantly upped their game in recent years and are keen to develop, we do foresee a slight slowdown over the next year or so.”
London’s skyline is set to alter dramatically over the next 5-10 years as a raft of tall towers pierce the clouds. 39 residential towers of 40 or more storeys are under construction or are in the pipeline, with more likely to follow. This will be a dramatic change for London which has hitherto been proud to be different, citing its historic fabric and protecting its treasured viewing corridors.
Download the report to read our exclusive interview with Chris Murray, Managing Director of W1 Developments discussing the development of the iconic Principal Tower in Shoreditch, a Foster & Partners designed tower destined to change the London skyline.
Planning Mix must be addressed in the Central Activity ZonePeter Gibney, Residential Development and Investment Director at JLL states: “We are urging the planners and policy makers to reconsider the unit mix prescribed in London’s Central Activity Zone (CAZ) to allow a greater mix of smaller units to be delivered due to affordability. We consider more family units should be planned for areas outside the CAZ where space is not as constrained, prices are lower and the living environment would be better for family residences.
There is currently a disconnect between the permitted mix for new developments in CAZ and the demand, with only 6% of new units on the market, post launch, being smaller studios or 1 beds. Our research shows in CAZ 77% of domestic demand is under £1m where only 6% of stock exists. Over £2m there is only 7% of demand yet 60% of the remaining stock. This mismatch is primarily the result of rigid planning requirements for larger units.”
Andrew Frost, Head of Residential at JLL concludes: “London desperately needs more housing. But crucially it needs the right type of housing in the right locations. High rise living, whether it is 20, 40 or 60 storeys can help, but only to some degree.
Utilising brownfield land in urban areas almost guarantees the housing delivered will be in the right kinds of locations. So building towers for the right people, at the right prices and in the right places will certainly help to deliver more homes for London.
I see a vastly different London over the next decade. We have to accommodate an extra one million people and building up, raising the roof as it were, will not only help to deliver greater housing volume, it will also keep our historic Capital city amongst the most spectacular in the world.”
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