London property developers warned about the increase in the market’s pricing

A new report regarding the development sector in London has expressed the need for caution regarding a market pricing trajectory which continues to see an upward trend. The report adds that developer expectations may need revising when considering top-bracket sales in particular.

The report, published by Knight Frank, combines market intelligence with recently published official data to provide an outlook on the next decade, offering estimates on the supply of both affordable and private housing over the period.

Based on the latest available census data, the report estimates that in both central and wider London markets, the present shortfall between household growth and supply of housing was likely to continue, with funding constraints responsible for limiting development in the coming years.

The demand for new homes – increasing constantly due to the creation of more households – will outweigh demand by some distance, despite an increase in development volume in the wider London market caused by an increase in the number of proposed development schemes.

The report, known as the London Development 2012 report, found that a mean average of approximately 24,000 homes per year could be created over the next decade in the wider London market. However, over the same area and time period, demand was likely to hit approximately 37,000 units per year. The demand for second homes plays a part in the shortfall also apparent in central London; where the disparity is even more dramatic.

Knight Frank’s head of residential research, Grainne Gilmore, said that the shortfall in Central London, which features many of the capital’s prime postcode areas, could be up as high as 55%, compared to 35% across Greater London.