London house prices will keep soaring as demand will outstrip supply by almost 50% over the next decade, a report out today has warned.
Knight Frank estate agents have found that the recent boom in residential developments across large parts of London will not be able to cater for an influx of people into the capital larger than previously estimated.
New government figures suggest that by 2021, London will see a 40% rise in new households (i.e. those in need of a single property), the equivalent of needing 525,790 new homes. Knight Frank says that the supply pipeline falls well short of this, with only 277,240 new units currently on the books.
This is despite a 63% year-on-year increase in the number of planning permission approvals, the estate agent said.
“The overall trend for development in London shows that demand for housing in the capital will continue to outstrip supply by quite some margin,” said Gráinne Gilmore, Knight Frank’s head of UK residential research.
“There is widespread recognition of the housing shortage in the capital, with [London Mayor Boris Johnson] pushing hard to encourage higher levels of development.
“While it is impossible for us to second-guess developers about when they will bring schemes forward, our judgements on schemes within the planning pipeline show that overall delivery will not match demand,” she added.
Average London prices grew by 6% last year, and soared by more than 20% in some boroughs, partially lifted by foreign demand for London property.
Some developers have been keen to try and profit from this by building large residential units in London’s less desirable outer boroughs, but Knight Frank says that this trend may not provide the much-needed reprieve from soaring prices and could cause a further division of the market.
“Despite the undersupply, developers need to be conscious of pricing, especially on the edges of prime central London,” said Gilmore.
“We are not discounting ‘oversupply’ in some local areas – with delivery outstripping local demand as measured by our data. However, the fluidity with which people can and do move across London suggests that the headline figures for supply and demand are a better indication of the wider trend in London.”
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