Source: AMR, DCLG, Savills
Reality check
Completion levels, according to Molior and latest EPC1 figures, are slowing. Both indicators show a 5-6 per cent decrease in the annual number of completions at Q3 2017. At the same time, private housebuilding starts are increasing and are currently up 3 per cent on an annual basis according to latest Molior figures. So this suggests that the pinch point in the construction process is during the build out phase.
Anecdotal evidence implies this is due to a number of factors which appear to be limiting construction capacity. The sheer scale of construction activity across London means there is less resource available. Inevitably with increasing starts and slowing completions, the number of units under construction is rising.
There are currently 64,000 units under construction in London, 18 per cent higher than the 2014-2016 annual average. What’s more, as new build schemes become ever more complex, pushing the boundaries of quality and amenity offering to differentiate from the competition, building contractors’ ability to keep pace is being tested. Brownfield development sites themselves are also becoming more complicated to build on as the stock of easier cleared sites for single use diminishes. All of these issues are being compounded by rising material costs and labour shortages.
As a result, the average build period is increasing. Schemes or phases of developments that completed between 2014 and 2016 took on average 2.1 years to complete. Schemes that have completed in 2017 have taken seven months longer on average. This varies considerably by development size, type and price point with large prime schemes, particularly towers, seeing some of the longest build periods.