The amount of new builds in London is an important indicator of how the economy is performing post Brexit. Throughout London the skyline is dotted with the arms of cranes; they say that there are over 300 in the London area. However with 46000 new homes built last year, London is still falling short of the market demand of 640000 new homes to be built every year in London. Overall there has been a price fall in the London Luxury property market of 6.8% put there is still a huge demand for properties priced at the lower end. Savills say that "58% of the housing need in London is for properties priced below £450 per sq ft" yet only 25% of properties being built are being priced at those levels with the average price been set at £1000 square feet. The Battersea power station development may be a prime example of how the pool of high end investors can run dry with a fall in pricing of 2.6% and the re-allocation of designated residential units to retail units and the fact that BPS have also reduced their projected profits from 20% to 8.25%. It also may be worth noting that Wandsworth council passed the application for a reduction of affordable flats from 636 to 386 reducing the overall % of affordable housing from 15% to 9%.
So with the fall in the demand for the high end luxury apartment in London and huge demand for mid-range priced apartments why not build more apartments priced around £450 per sq ft? The answer maybe in landowners demanding skyhigh prices for land and therefore developers having little choice but to build luxury high priced apartments to make a profit. Subsequently we are left with a market overflow of unwanted or difficult to sell luxury apartments and a shortfall of mid-range and affordable homes.
So whats the answer to the real shortage of affordable housing, well I don't think it is investors and developers sitting on land to restrict the supply to bolster the market, or councils forcing developers to build affordable homes when it is economically unrealistic for the developer to do so - as shown in the Battersea project - with Bouygues pulling out of the project and the development subsequently been sold on. Maybe providing and increasing grants (funded by central government) to developers to build affordable housing, releasing council owned land directly to developers, rather than to off shore investors, at price levels that can justify the building of affordable and mid-range homes. Flexibility in the Community Interest Levy (CIL) for the small to mid size building companies such as phased payments could bring more players and competition to the market. As well as the carrot local councils could be given effective powers to penalise landowners and developers for sitting on land designated and approved for development.
Surely if there is such a huge demand for properties priced at £450 sq ft that demand can be met by focusing on the bottom up - council land designated then sold and purchased at a two tier price structure: affordable homes and luxury homes?