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News Release

The mood in the Central London Development market brightens as prices stabilise in Q4

Say JLL in latest residential market update


​LONDON, 29 March 2017 – The mood in the Central London development market has brightened during late 2016 and early 2017. However, the market remains subdued relative to the past five years with development activity slowing in response to a more challenging sales market say JLL in latest Central London residential market update.

Development market
• New unit starts decline 75% in a year
• Under construction total passes peak in Q4
• Planning applications fall 27% during Q4

Neil Chegwidden, Residential Research Director at JLL comments: “Activity in both the Central London and Greater London Development markets has slowed over the past year indicating a concerning trend that the Capital’s housing supply problems are set to continue. This is despite the Mayor’s initiatives, the Housing White Paper and the growth in the institutional private rented community sector. New unit starts have slowed in Q4 2016 while the under construction total is expected to deplete further during 2017.

“An emerging trend is the growing divergence in activity and developer interest between Core and Outer Core markets as the impact of stamp duty reforms begin to bite. Over the past five years the average split in units under construction has been 45% in Core and 55% in Outer Core. But in terms of new planning applications in the year to Q4 2016 only 20% have been in Core markets indicating a real reduction in development activity in the years ahead in London’s most expensive postcodes.”

Sales market
• Prices tick up in Q4
• Market looking brighter
• Launches and sales decline
• Pricing remains sensitive to market conditions

Neil Chegwidden, Residential Research Director at JLL comments: “The Central London new build sales market is showing encouraging signs of improvement in late 2016 and early 2017.

“The first half of 2016 was impacted significantly by the additional stamp duty change introduced in April and heightened concerns surrounding the EU referendum. The Brexit decision further impacted activity in Q3 but we have seen some price rises and scheme successes in the final quarter of 2016 and also in 2017 with more buyers navigating the new market conditions. However, we have seen a reduction in scheme launches as developers have responded to easing sales volumes in 2016.”

Adam Challis, Head of Residential Research at JLL comments on the overall outlook for Central London Development: “We expect 2017 will be another year of adjustment, albeit with greater upside potential than had been anticipated in the immediate aftermath of the EU referendum decision. Developers remain cautious but are happy to proceed as schemes, in the most part, remain viable. We are predicting demand to increase slightly during 2017 as more people become accustomed to the new market landscape, although ongoing Brexit rhetoric is likely to disrupt the underlying improvement.

“We are forecasting sales prices to remain flat during 2017 as the number of unsold units increase, despite the volume of new launches being held back. The number of completions in Central London has risen by 50% over the past two years and is set to increase further in 2017. This has implications for the lettings market and despite increasing demand and higher inflation, we expect rental growth will remain subdued but stable this year as more units come to market.”

The Central London residential market update can be found here.