New household growth projections released by DCLG this week show that over 525,000 new households that will be created in London between 2011 and 2021.
The supply pipeline suggests that delivery of new units will fall well short of this, with an estimated 277,000 new units expected to be delivered over the next decade.
According to Knight Frank’s head of UK residential research, Gráinne Gilmore: “The overall trend for development in London shows that demand for housing in the capital will continue to outstrip supply by quite some margin. There is widespread recognition of the housing shortage in the capital, with the Mayor pushing hard to encourage higher levels of development.”
This news could further boost prices in the capital which are already at record highs. Since the end of 2007, which is considered to be the peak of the market in most developed countries, London property prices have risen by 7 per cent (Source: Land Registry).
London prime prices have risen by even more – they are up over 20 per cent since end of 2007 (Source: Knight Frank, £1m+ homes only). London prime property has performed particularly well recently with growth of 12.2 per cent in 2011 and 8.7 per cent in 2012. In the first 5 months of 2013, prime prices rose by another 3.2 per cent according the Knight Frank figures.
This has been fuelled mainly by foreigners buying in. According to Knight Frank, local buyers made up only half of London sales in 2012. Russian buyers made up a high 6.6 per cent, USA buyers 4.8 per cent, Indian buyers 4.4 per cent, French buyers 3.3 per cent, Italian buyers 2.6 per cent and South African buyers made up 2.2 per cent. Super-prime statistics published by Knight Frank are even more extreme with local buyers making up less than a third of London buyers in 2012. Super-prime refers to properties valued at more than £10m each.
Despite this strong growth, it should be noted that London prime prices are still at a similar level to the end of 2007 if measured in US dollar terms.
This is of course still significantly healthier than general UK house prices which are down over 34 per cent since the end of 2007 (if measured in US dollar terms).