he planning pipeline for new London homes is at its quietest since 2010 according to research out today, with soaring costs, interest rates and red tape all suppressing housebuilding activity.
Property consultancy CBRE UK, using data from analysts Molior and the Department for Levelling Up, Housing and Communities, said new home applications submitted and granted, as well as construction starts, totalled just 21,918 in the first half of 2023 — the lowest figure seen in 13 years. It also found applications for newbuild homes lodged in the second quarter were just 2061 — the lowest quarterly figure recorded since 2010 when the data was first available.
The firm warned that if the second half of 2023 continues at the same rate as the first the market will end the year with applications for approximately 11,800 homes, 47% below the previous trough recorded in the wake of the global financial crisis in 2010.
Julien Mills, the firm’s head of new homes, said: “Planning regulations, inflated construction costs, the cost of debt, and buyer affordability on borrowing and purchase taxation have all influenced the new homes development and second-hand market places recently. However, we need to continue to build more homes to address the supply-demand imbalance that exists in London.”
The figures came as one major player, Vistry, revealed today it is quitting private housebuilding and will focus solely on social housing partnerships.
According to the CBRE figures one area that has seen a better performance is “prime central London”.
The agent said planning for 989 homes was approved in the first half — greater than the annual totals of the last six years.
Mills added: “While there might be fewer active buyers in the market right now, there are many who are still active and are serious, many of whom are in strong financial positions. Again, those with cash reserves are utilising these in favour of higher LTV borrowing, minimising their exposure to higher mortgage rates.”
A spokesperson for the Mayor of London said: “Housing has been a top priority of the Mayor’s, and he has left no stone unturned in getting London building again. However, nationally, housing experts are forecasting a major drop in housebuilding, driven by high interest rates and build cost inflation.”
A number of housebuilders have pointed to headwinds the sector is facing. Andy Hill, group chief executive at The Hill Group today said as well as planning delays there are “viability challenges due to higher construction costs, significant increases in the servicing of debt and affordability issues for first time buyers”.
Last week Barratt’s boss said new developments are “increasingly constrained by an ineffective planning system”, with issues such as local planning departments being underfunded.