The number of new homes built in London is set to hit a record in 2017 - but will fall sharply from next year, according to new research from Savills.
Total net completions including sub-market and intermediate housing provision are expected to peak at 46,500 this year, ahead of the minimum 42,000 homes a year target set by the London Plan. This is still well short of real housing demand, Savills warned. The estate agent puts that figure at 64,000 homes per year.
"To a large degree, the fact that London almost hit its official new homes target last year should be seen as a massive success, but these figures suggest we are at the limit of what can be built under the current delivery model," said Edward Green, Savills research analyst.
"This year may present some harsh realities for a number of developers, but the bigger issue remains that of a city chronically undersupplied in the homes it desperately needs. An additional model for housing delivery is needed, that adds to the output of major housebuilders and the market sales model."
Supply doesn't match demand
"What is being built currently does not match the shape of demand," Savills researchers said, citing estimates that 58 per cent of demand is for homes costing less than £450 per square foot, which accounts for just 15 per cent of the five year build forecast. By comparison, oversupply is particularly acute above the £1,000 per square foot price point.
Over the past five years, private housebuilding starts have raced ahead of completions, Savills said.
However, over the next few years, private sector completions are forecast to fall sharply, due to rapidly falling home starts, as developers adjust to lower rates of sale. Savills said this highlighted a need for policy intervention to shift focus to the lower-value end of the market.
The Savills findings follow recent data showing central London housebuilding fell by 75 per cent in the fourth quarter of 2016, with home sales dipping by 24 per cent.