London Supply Update Q2 2019

An update on housing delivery in London

  • Housing delivery in London remains at near record levels, but still a considerable way off the target
  • Construction starts continue to slip in the prime and mainstream markets
  • Affordable homes delivery has remained relatively stable according to most recent data

The number of homes built in London remained at near record levels in the second quarter of 2019. The latest new build Energy Performance Certificates (EPCs), an unofficial leading indicator for total housing delivery, show 40,735 new build EPCs issued in London in the year to Q2 2019. This is a slight fall from the previous quarter, however 12 month delivery is 8% up on Q2 2018. Although, in comparison to the rest of the country, the number of homes being built in London is rising at a slower rate than the other regions.

Molior’s data (for private units on sites over 20 units) shows a similar trend to the EPC figures , increasing 10% year on year, with 23,554 private units being delivered in the 12 months to Q2 2019. MHCLG statistics, recorded as ‘Net additional dwellings’ remain updated to the 12 months to Q1 2018, where they recorded 31,723 homes delivered in London. These figures tend to undercount, as shown in Figure 1.

The official data for London new build supply – the GLA’s ‘Net conventional completions’ - will be updated in summer 2019 –those figures will cover the 12 months to Q1 2018. Despite the latest statistics showing housing delivery numbers in London remaining at significantly higher levels than any time in the last decade, the figures are still a long way off meeting the draft London Plan target figure of 65,000 homes annually and well below Savills’ own need estimate of 94,000 homes per annum.

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In the mainstream market (below £1,000psf) we have seen starts and sales continue to slip. In the year to Q2 2019, there were around 16,000 private construction starts in the mainstream market (on sites greater than 20 units). This represents a fall of 33% compared to Q2 2018, and is the largest annual drop since the end of 2016. This represents a continuation of the trend seen in over the past year, with the number of annual starts falling for four consecutive quarters.

Sales have followed a similar pattern to construction starts. There were around 15,600 sales in the mainstream market in the year to Q2 2019, which represents a -15% fall since Q2 2017, and is the fourth consecutive quarter of falls.

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In the prime market (above £1,000psf) the number of starts are back down to 2012 levels, but sales have increased on an annual basis for the first time since 2017.

Construction starts have continued to fall, with around 2,400 starts recorded in the year to Q2 2019. This represents an annual fall of -45%, and by-19% on a quarterly basis. Prime starts have remained at under 3,000 units for the last three quarters, the lowest they have been since 2012.

There has been an increase in the number of prime sales in the year to Q2 for the first time since Q3 2017. The figure of around 3,400 prime sales represents a 9% increase on the previous quarter, and ends a run of six consecutive quarters of sales falling.


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Affordable homes delivery

According to the GLA, the next figures for net conventional completions will be released in summer 2019. Their latest release showed that, from 2012 to 2017, the net supply of affordable homes has remained relatively stable, peaking at 7,610 in 2012/13, and only marginally falling below 7,000 once in 2015/16. However, these figures are still significantly lower than the peak of 2008/09, which saw 10,839 affordable homes delivered in London.

In 2016/17, affordable housing delivery was relatively evenly split between social rented, intermediate and affordable rent. Since the introduction of the Affordable Rent scheme in 2012/13 we have seen a shift from Social Rent, which has fallen by -48% since 2012/13, to Affordable Rent, which has seen a 715% increase in number of completions during the same period.

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The GLA also release their own annual dataset detailing gross affordable completions by their housing programmes from April 2012. In 2018/19, there were 7,544 gross affordable completions on programmes that the GLA is responsible for. This represents an increase of 41% on the 2017/18 figure, but also remains significantly below the peak of 2014/15, where completions totalled 17,875.

New construction on GLA affordable programmes has increased dramatically - there were more starts on sites of affordable homes in 2018/19 (14,544), than any other year since 2010/11, where affordable starts peaked at 16,351.

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