london residential development · the influence of political uncertainty on the prime london...
TRANSCRIPT
LONDON RESIDENTIAL DEVELOPMENT H1 2019
RESEARCH
32
LONDON RESIDENTIAL DEVELOPMENT H1 2019
KNIGHT FRANK RESEARCHRESEARCH KNIGHT FRANK
Construction costs
Construction costs have risen 14% in three years
which, along with economic uncertainty, is
exerting pressure on development land values.
Affordable housing
Delivery of Shared Ownership via section
106 has more than doubled in three years
and is likely to increase further as
land values adjust to new GLA policies.
Housing targets
Just five of London’s 33 boroughs met their
targets for housing need during 2017-18 and twenty delivered less
than half.
SupplyThere were 20% fewer
additional dwellings added to London’s
housing stock during 2017-18, though delivery remains well above the pre-crisis average. The
construction and planning pipeline
suggests delivery may fall further.
House pricesHouse prices declined
0.6% in 2018, according to the Land Registry, but markets are increasingly
localised and performance differs greatly by borough.
KEY TAKEAWAYS
Beyond the political uncertainty, London’s
economy has remained healthy since
the vote to leave the European Union.
Average UK weekly wages grew at their
fastest rate since 2008 in the third quarter
as employment in the capital hit another
record high.
It is these fundamentals that have
underpinned the property market, alongside
low borrowing costs, schemes like Help
to Buy and upgrades to infrastructure.
However, the market faces structural
challenges that are suppressing long-
term sales activity, including stretched
affordability, tighter mortgage regulations
introduced in the wake of the financial
crisis, and patchy house price
growth – though reports, including the
latest RICS sentiment survey, indicate
January was a stronger month than
November and December.
These factors, and a challenging
policy environment, have also weighed
on residential construction. Upward
momentum in annual housing delivery that
had continued unabated since 2012-13,
reversed in 2017-18, with the number of
dwellings added to total housing stock
in the capital, including conversions and
change of use, falling 20% compared with
the previous year.
This report brings together a wide range
of data on the London property market
to examine trends, rents, demand, the
development pipeline, construction costs
and more.
Ambiguity over the UK’s future relationship with the European Union has dominated the news agenda, though the China, US trade war and weakness in the Eurozone have added to economic headwinds and impacted sentiment.
LONDON IN CONTEXT
Source: Knight Frank Research, Land Registry
PRICES
HEAT MAP OF BOROUGHS FALLING BEHIND HOUSING
NEED IN 2017-18
House prices in Greater London declined 0.6% during 2018, though markets are localised and performance varies greatly by borough (fig 1). Outer London Boroughs have broadly been outperforming over the last 12 months following strong demand for affordable housing aided by Help to Buy and exemptions from stamp duty for first-time buyers.
In Prime central London, prices declined 4.8% during the twelve months to February and are now down 12% since the market’s peak (fig 2). The weak sterling is attracting interest from overseas buyers, with the effective discount in dollar terms approximately 25% when compared to 2015.
Source: Knight Frank Research, Land Registry
FIGURE 2 Long-term resale price movements Indexed 100 = Dec 2008
FIGURE 1 House price heat map
LONDON RESIDENTIAL DEVELOPMENT H1 2019
HF
KC
CW
CL
Hammersmith & Fulham
Kensington & Chelsea
City of Westminster
City of London
More than 3%
1% to 3%
0% to 1%
0% to -2%
-2% to -5%
Below -5%
HACKNEY
TOWERHAMLETS
WALTHAMFOREST
NEWHAM
REDBRIDGE
ENFIELD
HARINGEY
BARNET
HARROW
HILLINGDON
EALING
BRENT
WANDSWORTH
SOU
THW
ARK
LAMB
ETH
HF
KC
CW
BARKING &DAGENHAM
HAVERING
HOUNSLOW
RICHMOND-UPON-THAMES
MERTON
SUTTON CROYDON
BROMLEY
BEXLEY
GREENWICH
LEWISHAM
KINGSTON-UPON-THAMES
CAMDEN
ISLING
TON
CL
HF
KC
CW
CL
Hammersmith & Fulham
Kensington & Chelsea
City of Westminster
City of London
More than 3%
1% to 3%
0% to 1%
0% to -2%
-2% to -5%
Below -5%
HACKNEY
TOWERHAMLETS
WALTHAMFOREST
NEWHAM
REDBRIDGE
ENFIELD
HARINGEY
BARNET
HARROW
HILLINGDON
EALING
BRENT
WANDSWORTH
SOU
THW
ARK
LAMB
ETH
HF
KC
CW
BARKING &DAGENHAM
HAVERING
HOUNSLOW
RICHMOND-UPON-THAMES
MERTON
SUTTON CROYDON
BROMLEY
BEXLEY
GREENWICH
LEWISHAM
KINGSTON-UPON-THAMES
CAMDEN
ISLING
TON
CL
HF
KC
CW
CL
Hammersmith & Fulham
Kensington & Chelsea
City of Westminster
City of London
3,000+
2,000-3,000
1,500-2,000
1,000-1,500
500-1,000
100-500
HACKNEY
TOWERHAMLETS
WALTHAMFOREST
NEWHAM
REDBRIDGE
ENFIELD
HARINGEY
BARNET
HARROW
HILLINGDON
EALING
BRENT
WANDSWORTH
SOU
THW
ARK
LAMB
ETH
HF
KC
CW
BARKING &DAGENHAM
HAVERING
HOUNSLOW
RICHMOND-UPON-THAMES
MERTON
SUTTON CROYDON
BROMLEY
BEXLEY
GREENWICH
LEWISHAM
KINGSTON-UPON-THAMES
CAMDEN
ISLING
TON
CL
Year to Dec 2018
LONDON ANNUAL PRICE CHANGE
90
100
110
120
130
140
150
160
170
180
190
20192018201720162015201420132012201120102009
Prime Central London Outer London Greater London Inner London
54
LONDON RESIDENTIAL DEVELOPMENT H1 2019
KNIGHT FRANK RESEARCHRESEARCH KNIGHT FRANK
Source: Knight Frank Research, Land Registry
FIGURE 3 Monthly sales, Greater London
Sales in London during the third quarter of 2018 were 12% lower than the previous year, amid hesitancy among buyers as the date of the UK’s March EU departure drew nearer (fig 3).
Some 6,670 transactions were recorded by the Land Registry in October. Repeated changes to property taxation and political uncertainty created by three general elections and two referendums has weighed on sales activity over the longer term. The government’s consultation proposing an extra 1% stamp duty on overseas buyers will run until May 6th.
Knight Frank data indicates pent up demand is forming in many prime markets while buyers wait for greater political clarity before making purchases, with the ratio of new prospective buyers to homes available at highest level in four years.
ACTIVITY RENTS
Mainstream rents in the capital climbed 0.2% during the year to December and have remained largely flat for the past two years.
“
The number of new prospective buyers in Prime Central London registering rose by 6% in the year to February. Indeed, the ratio of new demand to new supply rose to 9.4 in February 2019, the highest monthly figure on record.
“
The influence of political uncertainty
on the prime London property market
has grown markedly over the last nine
months. During the first half of 2018 there
were signs the market was beginning to
stabilise as asking prices adjusted more
fully to reflect higher transaction costs.
Sales volumes in prime central London
were 7% higher in the year to March
2018 than the previous 12-month period,
LonRes data showed. However, by
January this year, with Brexit uncertainty
persisting ahead of the UK’s planned
departure from the EU, volumes were
down by 16%.
Pricing behaved in a similar way. While
the annual decline recorded in prime
central London in February 2018 was
0.1%, 12 months later the decrease had
widened to 4.8%.
Identifying individual factors affecting the performance of the prime London property market can be a complex task but the impact of political uncertainty has been decisive in recent months.
However, there are signs that pent-up demand and the conditions for a recovery are building. While the number of exchanges is declining, the number of new prospective buyers registering rose by 6% in the year to February. Indeed, the ratio of new demand to new supply rose to 9.4 in February 2019, the highest monthly figure on record.
Meanwhile, the average number of days between listing and a property going under offer fell 2% in 2018 compared to the previous year, in a sign that more appropriately-priced properties went under offer more quickly.
So, while it is unknown when the current level of political uncertainty will recede, the conditions for a recovery in the prime London property market appear to be taking shape.
THE PRIME LONDON PROPERTY MARKET IS IN A STRONGER POSITION THAN IT APPEARS TO BE ON THE SURFACE
Declining supply pushed prime central London rents up 1.3% during the year to January. Prime outer London rents remained unchanged (fig 4).
The decrease in supply is due to more landlords leaving the sector following tax changes. Annual growth in the number of outstanding buy-to-let mortgages has slowed dramatically since early 2016, in a sign that an increasing number of landlords are rationalising their portfolios.
Mainstream rents edged upwards 0.1% during the year to January and have remained largely flat for the past two years.
The Build to Rent sector accounted for 23% of private starts in the capital during 2018. In Greater London, estimated net initial yields for the sector’s prime properties, defined as institutional quality, stabilised assets, stood at 4% during Q4 2018. In zones 3-4, estimated net initial yields stood at 3.75%.
Source: Knight Frank Research, ONS
FIGURE 4 Annual change in London rents
2017 20182016201520142013201220112010200920082,500
5,000
7,500
10,000
12,500
15,000
17,500
20,000
Help to BuyEquity loan
Stamp duty relief for first-time-buyers
Help to BuyMortgage Guarantee
Stamp dutyreformed
Stamp Dutyholiday ends
Stamp Duty risesto 5% £1m+
First-time buyerStamp Duty holidayup to £250,000
3% Stamp Duty surcharge for additional properties
GeneralElection
Vote toleave EU
GeneralElection
GeneralElection
Stamp Dutyholiday up to£175,000
Mon
thly
tran
sact
ions
num
ber
Help to Buy London launched
NewBuyGuarantee
launched
First-time buyer Stamp Duty holiday ends
Stamp Duty raised to 7% for £2m+
ScottishReferendum
-15%
-10%
-5%
0%
5%
10%
15%
20%
2019201820172016201520142013201220112010
Greater LondonPrime Central London
PENT UP DEMAND IS FORMING IN PRIME MARKETS WHILE BUYERS WAIT
FOR GREATER POLITICAL CLARITY BEFORE
MAKING PURCHASES Tom BillHead of London research
“
76
LONDON RESIDENTIAL DEVELOPMENT H1 2019
KNIGHT FRANK RESEARCHRESEARCH KNIGHT FRANK
FIGURE 7 Housing delivery in London measured against the Government’s housing need assessment Percentage of annual housing need achieved during 2017-18, by borough
The number of residential units entered for planning permission in projects of 20+ private units has been falling since 2014, from 51,621 to 40,461 in 2018, according to Molior (fig 8). Meanwhile, the number of units granted permission in large schemes in 2018 increased slightly to 34,834, though remains well below the 2015 peak of 47,818.
The planning environment in the capital remains challenging. Official statistics on planning applications state 88% of major applications were decided within 13 weeks during Q3 2018, though the complexities of negotiating section 106 agreements and discharging planning conditions is a source of delay and uncertainty for developers.
The Mayor’s 35% Affordable Housing threshold, that climbs to 50% for projects on public land, is creating further challenges as land values take time to adjust to the new policy.
Source: Molior
FIGURE 8 Planning Applications, Permissions Developments of 20+ private unitsPLANNING
During 2017-18, 31,723 net additional dwellings were added to Greater London’s housing stock, a 13% decline in new homes compared to the previous year, largely due to a significant decline in the number of offices being converted into homes (fig 6). Office to residential conversions fell 52% to just 2,993 units, suggesting much of the most suitable space has already been converted since the Permitted Development Right was introduced in May 2013.
The decline in delivery will pose challenges for Mayor Sadiq Khan, who has set a target of 66,000 annual additional dwellings in the capital, itself some way below the government’s standard method for calculating housing need, which indicates councils should plan for at least 72,407 homes a year.
Just five of London’s 33 boroughs met their targets for housing need during 2017-18 and as many as twenty delivered less than 50% (fig 7). However, three of the boroughs that met their target actually exceeded the target by more than 40%. Source: Molior
FIGURE 5 Housing Construction starts Developments of 20+ private units
Looking ahead, new build completions dipped 13% in 2017-18 to 26,769, and could be set to fall further. Data from Molior, which includes projects of 20 or more private units,
indicates the number of units that started construction in 2018 was 23,130, a drop of 32% compared to the 2015 peak (fig 5).
NEW APPLICATIONS NEW PERMISSIONS
FIGURE 6 Net Additional Dwellings, Greater London
Source: MHCLG
Source: Knight Frank Research, MHCLG
HOUSING DELIVERY
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000
-5,0002017-182016-172015-162014-152013-142012-13
New Build Net Conversions Net Change of Use Demolitions
Current London Plan Target42,000
Draft London Plan Target,due for adoption Autumn 201966,000
Local Housing Need72,407
2017-182016-172015-162014-152013-142012-13
New Build Net Conversions Net Change of Use Net Other Gains, Losses Demolitions
Current LondonPlan Target42,000
Draft London PlanTarget 66,000
Local Housing Need72,407
2,993 ▼52%Office to residential
change of use
26,769 ▼13%New build completions
31,723 ▼20%Net additions
0
10,000
20,000
30,000
40,000
50,000
60,000
Inner London Outer London TotalInner London Outer London Total
0
10,000
20,000
30,000
40,000
50,000
60,000
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
0
10,000
20,000
30,000
40,000
50,000
60,000
Inner London Outer London TotalInner London Outer London Total
0
10,000
20,000
30,000
40,000
50,000
60,000
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2018201720162015201420132012201120102009
Greater London Inner London Outer London
HF
KC
CW
CL
Hammersmith & Fulham
Kensington & Chelsea
City of Westminster
City of London
0% to 20%
21% to 40%
41% to 60%
61% to 80%
81% to 100%
More than 100%
HACKNEY
TOWERHAMLETS
WALTHAMFOREST
NEWHAM
REDBRIDGE
ENFIELD
HARINGEY
BARNET
HARROW
HILLINGDON
EALING
BRENT
WANDSWORTH
SOU
THW
ARK
LAMB
ETHHF
KC
CW
BARKING &DAGENHAM
HAVERING
HOUNSLOW
RICHMOND-UPON-THAMES
MERTON
SUTTON CROYDON
BROMLEY
BEXLEY
GREENWICH
LEWISHAM
KINGSTON-UPON-THAMES
CAMDEN
ISLING
TON
CL
HF
KC
CW
CL
Hammersmith & Fulham
Kensington & Chelsea
City of Westminster
City of London
0% to 20%
21% to 40%
41% to 60%
61% to 80%
81% to 100%
More than 100%
HACKNEY
TOWERHAMLETS
WALTHAMFOREST
NEWHAM
REDBRIDGE
ENFIELD
HARINGEY
BARNET
HARROW
HILLINGDON
EALING
BRENT
WANDSWORTH
SOU
THW
ARK
LAMB
ETH
HF
KC
CW
BARKING &DAGENHAM
HAVERING
HOUNSLOW
RICHMOND-UPON-THAMES
MERTON
SUTTON CROYDON
BROMLEY
BEXLEY
GREENWICH
LEWISHAM
KINGSTON-UPON-THAMES
CAMDEN
ISLING
TON
CL
HF
KC
CW
CL
Hammersmith & Fulham
Kensington & Chelsea
City of Westminster
City of London
3,000+
2,000-3,000
1,500-2,000
1,000-1,500
500-1,000
100-500
HACKNEY
TOWERHAMLETS
WALTHAMFOREST
NEWHAM
REDBRIDGE
ENFIELD
HARINGEY
BARNET
HARROW
HILLINGDON
EALING
BRENT
WANDSWORTH
SOU
THW
ARK
LAMB
ETH
HF
KC
CW
BARKING &DAGENHAM
HAVERING
HOUNSLOW
RICHMOND-UPON-THAMES
MERTON
SUTTON CROYDON
BROMLEY
BEXLEY
GREENWICH
LEWISHAM
KINGSTON-UPON-THAMES
CAMDEN
ISLING
TON
CL
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000
-5,0002017-182016-172015-162014-152013-142012-13
New Build Net Conversions Net Change of Use Demolitions
Current London Plan Target42,000
Draft London Plan Target,due for adoption Autumn 201966,000
Local Housing Need72,407
2017-182016-172015-162014-152013-142012-13
New Build Net Conversions Net Change of Use Net Other Gains, Losses Demolitions
Current LondonPlan Target42,000
Draft London PlanTarget 66,000
Local Housing Need72,407
2,993 ▼52%Office to residential
change of use
26,769 ▼13%New build completions
31,723 ▼20%Net additions
2017-18 data and annual change
98
LONDON RESIDENTIAL DEVELOPMENT H1 2019
KNIGHT FRANK RESEARCHRESEARCH KNIGHT FRANK
Social rent London affordable rent Affordable rent Intermediate rent Shared ownership Affordable home ownership Unknown tenure
BARKING ANDDAGENHAM
BARNET
CAMDEN
EALINGTOTAL UNITS: 379
GREENWICH
HACKNEY
HOUNSLOW
LAMBETH
LEWISHAM
SUTTON
WALTHAM FORESTTOTAL UNITS: 412
WESTMINSTER
BEXLEY
BRENT
BROMLEY
CITY OF LONDON
CROYDON
HAMMERSMITHAND FULHAM
HARROWHAVERING
HILLINGDON
ISLINGTON
KENSINGTONAND CHELSEA
KINGSTONUPON THAMES
MERTON
REDBRIDGE
RICHMONDUPON THAMES
WANDSWORTH
NEWHAMTOTAL UNITS: 457 SOUTHWARK
TOTAL UNITS: 418
TOWER HAMLETSTOTAL UNITS: 850
ENFIELD
The Mayor’s introduction of a fast-track through planning if developers hit 35% Affordable Housing, or 50% on public land, is still being digested and some schemes that pre-date the policy change remain in limbo.
Affordable Housing delivery via section 106 (nil grant) in London has climbed more than 70% in three years, though the mix of tenures has changed notably (fig 10). Homes built for Social Rent were 66% lower in 2017-18 than 2015-16, and the proportion of Shared Ownership has more than doubled over the same period.
This trend is likely to continue as land prices take time to adjust to the new threshold policy. Meanwhile the challenge to increase delivery of Affordable Housing via section 106 is likely to grow amid a wider environment of declining residential construction.
The onus to hit ambitious targets is likely to fall on Registered Providers, who are in turn increasing construction of homes for market sale to offset a lack of grant funding.
In prime central London, land values declined 2.8% in Q4, taking the annual decline to 5.6% (fig 11).
Values have dropped almost 20% since the peak of the market in Q3 2015, and with the weak sterling, some notable buyers have decided prime central London land now represents good value.
Knight Frank’s Urban Brownfield Index, which measures the average price of Urban Brownfield land across the country climbed 1% during Q4, taking the annual decline to 0.5%. Labour costs continue to edge up and the relatively weak pound has made imported building materials more costly for housebuilders.
Residential construction costs, which include materials, plant and labour, have climbed 14% in the three years to January (fig 12). Rising costs, alongside economic uncertainty over Britain’s impending departure from the European Union, have prompted developers to increase their margins, which is suppressing growth in land values in both inner and outer London.
Sites of all types are transacting, though volumes remain low. Land owners are in many cases choosing to wait for more economic clarity before choosing to sell.
FIGURE 10 Affordable Housing delivered by developers via Section 106
Source: Knight Frank
FIGURE 11 Residential Development Land Prices PCL Indexed 100 = Q3 2011, Urban Brownfield Indexed Q4 2014
Source: ONS
FIGURE 12 Construction costs, 10 yr change Indexed 100 = Oct 2008
FIGURE 9 Total affordable housing completions 2017-18, tenure split Size of the circles correspond to the number of affordable units delivered
Source: MHCLG
AFFORDABLE HOUSING
LAND AND CONSTRUCTION COSTS
Affordable Housing policy in London is in a state of flux as developers adjust to new tenures and more stringent targets from City Hall.
The Mayor’s introduction of a fast-track through planning if developers hit 35% Affordable Housing...is still being digested and some schemes that pre-date the policy remain in limbo.
“
LONDON RESIDENTIAL DEVELOPMENT H1 2019
0
500
1,000
1,500
2,000
2,500
3,000
2017-182016-172015-16Social Rent Affordable RentIntermediate Rent Shared OwnershipAffordable Home Ownership
100
105
110
115
120
125
130
135
140
145
150
20182017201620152014201320122011
Prime central LondonUrban brownfield, England
90
100
110
120
130
2018
2017
2016
2015
2014
2103
2012
2011
2010
2009
2008
1110
LONDON RESIDENTIAL DEVELOPMENT H1 2019
KNIGHT FRANK RESEARCHRESEARCH KNIGHT FRANK
INFRASTRUCTURE UPGRADES PLANNED AND PROPOSED
FORECASTSINFRASTRUCTURE
2019 2020 2021 2022 2023 2019-2023
London -2.0% 1.0% 3.0% 2.0% 5.0% 9.2%
Prime Central London 1.0% 2.0% 3.5% 2.0% 4.5% 13.7%
Prime Outer London 0.0% 2.0% 3.5% 2.0% 5.0% 13.1%
SALES MARKET Annual % growth
RENTAL MARKET Annual % growth
2019 2020 2021 2022 2023 2019-2023
London 2.5% 2.5% 3.0% 3.5% 3.5% 15.9%
Prime central London 3.0% 2.0% 1.0% 1.5% 2.0% 9.9%
Prime outer London 2.0% 1.5% 1.5% 2.0% 2.0% 9.3%
UK 2.0% 2.0% 2.5% 2.5% 3.0% 12.6%
The capital has seen unprecedented
investment in new infrastructure, with key
projects reaching fruition over the next three
to five years. The majority government-
sponsored, £7 billion Thameslink Programme
that has been underway for a decade is now
largely complete, including 115 new trains,
station upgrades and new technology.
In the short term, the scheduled December
2018 opening of Crossrail, which upon
opening will be known as the Elizabeth Line,
was delayed after cost overruns and is now
scheduled to open after Autumn 2019, with
multiple reports suggesting a 2020 opening at
the earliest. Similarly, the £1 billion Northern
Line extension, originally due to open in 2020,
is now expected to open in 2021.
Looking further into the future, the plan for
the Silvertown Tunnel Thames crossing
was approved in May 2018 and the tunnel
is expected to be operational by 2024. The twin-tunnel cross will connect the Lower Lea Valley, where 20,000 homes are in the pipeline, with the 10,000-home regeneration of the Greenwich Peninsula.
More transport upgrades are proposed, including the High Speed 2 trainline, which is slated to be operational by 2026, Crossrail 2, and an extension of the Bakerloo underground line, both of which have proposed opening dates in 2030.
Hayes
Bromley
Catford
LewishamNew Cross Gate
Elephant & Castle
NineElms
Battersea
EustonSt. PancrasOld Oak
Common
ActonMainlineWest
Ealing
Tottenham Hale
NewSouthgate
AlexandraPalace Turnpike
Lane
SevenSisters
DalstonJunction
Angel
Victoria
King's RoadChelsea
ClaphamJunction
TootingBroadway
Wimbledon
MotspurPark
Teddington
TottenhamCourt Road
Paddington
HamptonCourt
Kingston
AbbeyWood
WestDrayton
HeathrowTerminal 4
Surbiton
Angel Road
Langley
ChadwellHeath
Kennington
HeathrowTerminal 5
HeathrowTerminals 2 & 3
WorcesterPark
Shepperton
Sunbury
Stratford
Orpington
ElmersEnd
Farringdon
FinsburyPark
TulseHill
LondonBridge
Charlton
Hendon
Cricklewood
Mill HillBroadway
London CityAirport
StansteadAirport
GatwickAirport Bromley
Barnet
Hillingdon
Bexley
Ealing
Brent
Harrow
Hounslow
Redbridge
Merton
Greenwich
Newham
Lewisham
Haringey
Lambeth Southwark
Wandsworth
Camden
Waltham Forest
Richmond Upon Thames
Hackney
IslingtonBarking & Dagenham
Tower Hamlets
Silvertown Tunnel (2024)
Bakerloo Line Proposed (2030 - subject to approval)Bakerloo Line ExistingNorthern Line Extension (2021)Crossrail 2 ProposalsCrossrail 2 (2030 - subject to approval)Elizabeth Line (2020)HS2 Proposed (2026 - subject to approval)
Thameslink (£7bn upgrades complete 2020)
DATES TO WATCH
20212019 2020
Summer
Government response to Letwin Review
Northern Line extension opens
2022
UK general electionExtra Stamp Duty for overseas buyers consultation ends
20th May
Spring Statement
13th March
Mayoral CIL 2 payable
1st April
Mayor’s Ultra Low Emission Zone charging begins
8th April
Delayed EU departure date
12th April
Crossrail opens
Date TBC
London Mayoral election 2020
7th May Date TBC 5th May
1.7 millionProjected growth in
London’s population, 2015-2035
40,461Private units submitted for
planning in Greater London in 2018
9.1New prospective buyers
compared to homes listed for sale in Prime
London, January
24%Forecast growth in gross
value added, a measure of economic growth, Greater
London, 2019-2029
15,056Greater London homes
bought with Help to Buy equity loans since April 2013
NB. Price forecasts are for existing homes. Property values in the new-build market may perform differently.
Sources: Knight Frank Research, GLA, Molior, Experian, MHCLG
Construction scheduled to begin on Heathrow third runway
Date TBCAutumn
New London plan adopted
UK local elections
2nd May
EU departure date if May’s deal is approved by MPs
22nd May
Important Notice
© Knight Frank LLP 2019 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.
Knight Frank Research Reports are available at KnightFrank.com/Research
If you’re thinking of buying or selling, or would just like some property advice, please do get in touch.
Get in touch
Residential Capital Markets
Nick Pleydell-Bouverie +44 20 7861 5256 [email protected]
Adam Burney +44 20 7861 5170 [email protected]
Senior Living
Tom Scaife +44 20 7861 5429 [email protected]
Land and Consultancy
Charlie Hart +44 20 7718 5222 [email protected]
Debt Advisory
Lisa Attenborough +44 20 3909 6846 [email protected]
TH
E W
EA
LTH
RE
PO
RT
2019
The global perspective on prime property and investment
The Wealth Report 2019
UK Housing Market Forecast - November 2018
RESEARCH
UK RESIDENTIAL MARKET FORECAST 2018
Knight Frank/ UCAS Student Housing Survey - 2018/19
STUDENT ACCOMMODATION
SURVEY 2018/19
STUDENT ACCOMMODATION
SURVEY 2018/19
Eastern Opportunities – 2019
EASTERN OPPORTUNITIES 2019
RECENT MARKET-LEADING RESEARCH PUBLICATIONSRESIDENTIAL RESEARCH
RESIDENTIAL DEVELOPMENT LAND INDEX
Average greenfield development land prices declined 0.6% in Q4 2018, down from 2.6% growth in Q3, paring annual growth to 0.6%. Labour costs continue to edge up and the relatively weak pound has made imported building materials more costly for housebuilders.
Anecdotally, site visitor numbers remain robust, though customers are taking longer to commit to purchases, particularly in the south of England. In the resale market during the first nine months of this year, when compared with 2016, the average time taken from listing a home to sale agreed in the East of England, the South East and London climbed more than 30%, according to Rightmove data. By contrast, the time taken from listing to sale agreed over the same period declined by 5.6% in the East Midlands, 11.4% in the West Midlands and 9.9% in the North West.
These risks, alongside economic uncertainty over Britain’s impending departure from the European Union, have prompted developers to increase their margins, which is suppressing growth in greenfield land values.
Urban brownfield land values declined by 0.5% during 2018, also for the reasons
outlined above. That’s the first annual decline since Knight Frank began tracking Urban Brownfield land values in Q4 2015.
Values edged up 1.0% during the quarter, however, following a 2.3% decline in Q3, led by gains in Birmingham City Centre sites.
Birmingham remains undersupplied when it comes to housing, according to official data, though heightened activity in the land market during the past three years has meant a high quality pipeline is emerging. Developers are likely to be increasingly selective when purchasing land during the coming quarters.
In Prime central London, land values declined 2.8% in Q4, taking the annual decline to 5.6%. Values have dropped almost 20% since the peak of the market in Q3 2015, and with the weak sterling, some notable buyers have decided Prime central London land now represents good value.
Sites of all types are transacting, though volumes remain low. The central London land market is also susceptible to negative sentiment relating to Brexit and land owners are in many cases choosing to wait for more clarity before choosing to sell.
RISING COSTS AND UNCERTAINTY CURB LAND VALUE GROWTH Increasing build costs, patchy house price growth and increased economic uncertainty are, to different degrees, weighing on land values in urban brownfield, greenfield and Prime central London locations.
Key Facts Q4 2018 Average greenfield development land prices declined 0.6% in Q4, taking the annual growth to 0.6%
Urban brownfield development land prices returned to growth, climbing 1.0% during the quarter. The annual change was -0.5%
Prime central London development land values declined 2.8%, taking the annual decline to 5.6%
-12.5%
-10.0%
-7.5%
-5.0%
-2.5%
0.0%
2.5%
5.0%
7.5%
10.0%
Q4Q3Q2Q1Q4Q3Q2Q1Q42016 2017 2018
Prime Central London English Greenfield
Urban Brownfield
Source: Knight Frank Research
FIGURE 2
Annual change in average land values
Source: Knight Frank Research
FIGURE 1
Residential development land prices Rebased 100 = Sep 2011 (Urban Brownfield = Dec 2014)
90
100
110
120
130
140
150
20182017201620152014201320122011
Ind
ex
Prime Central London English Greenfield
Urban Brownfield
PATRICK GOWER Associate, UK Residential Research
“ Labour costs continue to edge up and the relatively weak pound has made imported building materials more costly for housebuilders.”
@patrickgower
UK Res Dev Land Index – Q4 2018
The London Review – Spring 2019
PENT-UP DEMAND BUILDS ASKING PRICES ADJUST OUTPERFORMANCE VERSUS OTHER ASSET CLASSES
LONDON RESIDENTIAL REVIEWSPRING 2019
RESIDENTIAL RESEARCH
The London Report – 2019
TH
E L
ON
DO
N R
EP
OR
T 2
01
9
The UK Tenant Survey – 2019
MULTIHOUSING 2019
PRS RESEARCH
Sector update | Tenant Survey 2019: Results | Investor Survey
“ BEYOND THE POLITICAL UNCERTAINTY, LONDON’S ECONOMY HAS REMAINED HEALTHY SINCE THE VOTE TO LEAVE THE EUROPEAN UNION. AVERAGE UK WEEKLY WAGES GREW AT THEIR FASTEST RATE SINCE 2008 IN THE THIRD QUARTER AS EMPLOYMENT IN THE CAPITAL HIT ANOTHER RECORD HIGH.”
Patrick Gower, Residential [email protected]
If you would like further insight into residential markets please get in touch.