With Londoners increasingly being priced out of central London, demand is moving to the outer boroughs, such as in North East London. This is driving strong residential growth, yet the average house price across the area remains lower than London’s average.

With more land made available in North East London through investment in infrastructure, the area has the potential to deliver thousands of new homes during the next few years. These could be delivered at a price that meets the demand for affordably priced housing.

Affordability of outer boroughs

House price growth and mortgage regulation, restricting the amount that can be borrowed relative to income, means affordability pressures are growing in London. The median house price is now 13 times more than the median income. The lower prices across North East London make it a more affordable area – in Havering, for example, homes are 9.7 times more expensive than incomes. This is still higher than the national average of 7.6, but is a key factor in driving demand to the outer boroughs of London and beyond.

A major cause of affordability pressures is the undersupply of housing across the capital. It’s at the lower end of the market where there is the greatest shortage in supply relative to housing need.

Supply challenges

Recent delivery of new homes across the five boroughs of North East London has fallen short of target. A total of 4,200 homes were delivered in the year to March 2016 – 2,185 fewer than the need identifieed in the 2015 London Plan. More recent figures show that delivery across the area has increased. There were just under 4,800 EPCs issued to new homes in the year to June 2017, equating to 2,489 new homes in Newham and 369 in Redbridge.

However, this is still not enough. In the 2017 London Plan Review, housing need has increased by 84% to 11,762 new homes per annum across the five boroughs. This has increased the shortfall, so current delivery would need to increase by 148% to meet targets.

Development in North East London is not without its challenges. In Newham and Waltham Forest, there have been higher levels of conversions, particularly from office to residential. More suburban boroughs, such as Havering and Redbridge, have less commercial stock to supplement new build delivery in this way. These two boroughs also have significant restrictions on land with 56% and 37% of land under Green Belt, respectively.

In the next five years, new home delivery will be focused around Stratford and Barking (see below). However, there are key opportunities to increase supply across all five boroughs, as we examine in Connecting opportunities.

^{Source: Savills Research, GLA and DCLG}

^{Source: Savills Research | Note *Only selected roads and rail lines are shown}