Annual new build sales have fallen by 13.8% in prime central London with quarterly transactions plummeting to 88, London Central Portfolio (LCP)’s latest Residential Index reports have found.
Sales in Greater London have also slowed, with growth falling from 25% to 5.2%, resulting in a fall in market share to 15.6% from 20% a year ago.
Naomi Heaton, chief executive of LCP, said: “Findings from LCP’s April LCPAca Residential Index, LOREMA’S 2018 report and the ONS all show a troubling picture for the new build sector in London.
“ONS data just released for the first quarter shows the construction sector suffering its worst performance since 2012, with private housebuilding shrinking for the first time since June last year.
“The sector contracted at its sharpest rate in just over five years, with output falling by 2.3% compared with the previous three months.
“Whilst the ‘Beast from the East’ has shouldered much of the blame, in truth it was already suffering.
“According to the ONS, a large portion of the fall was due to a sharp 2.6% decline in January. This is a significant barometer of whether developers think there is strong enough demand for long-term projects.”
The largest falls were seen in Southwark (61.8%) and Tower Hamlets (43.3%).
Applications increased by 4% although there were falls in seven of the 11 boroughs with the largest at just over 42% in both Wandsworth and Westminster. Planning permissions also fell by 7.4% and completions by 6.1%.
Similarly new build starts fell by 1.1% despite a 25.8% increase in Outer London and planning permissions also fell by 1% and completions by 3.4%.
Average prices in prime London have fallen by 12.7% while outer London has seen a more robust performance, with average prices increasing by 8.5%.
Nevertheless, average prices of new builds in London as a whole have fallen by 2.6%.
Tower starts (residential buildings of more than 20 storeys) dropped from 46 in 2016 to 32 in 2017, resulting in units started falling 33%, from 8,200 to 5,500.
Tower applications fell by almost 10% from 74 to 67, with far fewer in Zone 1 than previously.
Heaton added: “A downturn in international buyer sentiment has impacted the new build sector which remains the most volatile.
“According to the LCPAca Residential Index, there have been both quarterly and annual price falls in Prime Central London and a lacklustre performance in Greater London.
“It is quite possible new build transactions will continue to decline, particularly in Inner London, given the 25.4% fall in new build starts reported by LOREMA.
“This situation could well worsen over the next two to three years, as schemes under construction which fail to sell off-plan come to completion.”
“This may well impact developers’ desire to commence new build projects, resulting in a negative impact on the provision of new housing, one of the government’s key aims.
“However, an increase in activity in Outer London may help mitigate this, particularly given the tower blocks being developed in the more peripheral areas of London, the fact that 30% of new tower starts are for the rental market compared with zero four years ago is also encouraging for the burgeoning generation of renters.”