Londons’ property prices are soaring phenomenally. The trend is driven by factors such as heightened foreign demand for central London properties and huge shortfall fall in new developments. The astounding levels of demand for housing property is driven by rising population London city and may bolster the rental sector positively.
Rising demand for property in London has led to projections of a substantial price rise and skewed supply of properties. It is clear that in the next decade London property prices will be one of the world’s highest.
This is because the supply of new homes in London fails to keep up pace with demand. The analysis of global property research firm Knight Frank indicates that the prospect of London house prices soaring is clear. The demand is outstripping supply by 50 percent or more and that in the next decade the trend will only persist.
Rising Influx to City
The boom in residential developments across London will not be able to take care of the housing needs of the rising influx of people moving to the capital. Studies suggest London will see 38 percent rise in new households by 2012 and demand will translate to 525,790 new homes. But the supply pipeline is only 277,240 units.
London Mayor Boris Johnson has been pushing hard to encourage higher levels of development, underscoring the soaring housing shortage in the capital.
Price Rise
According to statistics, average London prices grew 6 percent in 2012 and jumped more than 20 percent in some boroughs driven by foreign demand for London property.
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The positive aspect of London property prices is that the high demand helped the London property market to get away from the negative fallout of the financial crisis because of the growing supply-demand mismatch. Amazingly the city recovered drastically from the slowdown with values of prime central London properties jumping 60 percent since 2008.
The rising demand for London property from national and international buyers have aided the market recovery and higher margins in the process. This trend is not set to change in the next few years.
Many units currently in the planning pipeline are likely to be delivered over the next decade. It will be around £80bn based on rough estimates upon current average borough values. It is highly unlikely that the new units can meet the projected of new households as population continues to expand.
While people living in the capital have seen prices rising by 20 percent over the last two decades, housebuilding levels only crashed 30 percent during the financial downturn from 2009 to 2010 period.
Greater London
Greater London has some good news. In the next 10 years, some 277,240 residential units will be finished and 1,77,340 of it will be in the private sector.
Taken positively, this housing shortage can turn into a boost to the rental property sector where more institutional investment is coming up. That means more developments to rent in London will be available and can offset the demand for new property from new households.
