East London: Home Construction And Demand
As Britain begins a new year and a new real estate cycle the supply of homes continues to be a source of concern. Over 6000 homes were built in the past three years mainly in East London and shortages remain thus driving up property prices.
Between 2015 and 2017 2,900 new units became available in the Canary Wharf district. PropertyWire reports that 52% of the new housing was in Tower Hamlets with 1,800 new units in the Royal Docks and 1,300 new units for Olympic Park.
Population growth continues to strain demand with Newham growing by 20,000 since 2014 and Tower Hamlets growing with 25,0000 additional residents in the same period. Land Registry data shows a 12% increase in Canary Wharf, 26% in Royal Docks and 32% in the Olympic Park market areas.
In these three locations there has been in increase of 123% for properties with sale prices of £1 million in 2016. For prime central London the results are a decline in population by 5.7% with prices rising for Greater London increasing by 17%.
Charlie Hart, dead of City and East Residential Development at Knight Frank told PropertyWire:
‘The past few years have seen some big changes in market conditions which have had implications on land supply, scheme gestation periods and the sale of end product. 2015 saw ground breaking achievements and sales volumes for some of the standout schemes in East London, notably Royal Wharf. There was momentum in the market from both UK and overseas developers and the prospects for supply looked strong,’
‘However, in more recent times we have had a number of disruptors in the form of Brexit and Government cooling measures. We have also had recent changes in planning policy direction with a new Mayor in City Hall. The combination of these measures has been significant and as a corollary, developers have been forced to review many of their business plans to cope with not only the shifting conditions and funding environments, but also new tax regimes which will change the balance of their risk /reward returns,’ he explained.
‘The uncertainty within the macroeconomic world has also impacted upon purchasers with many now worried about the future direction of pricing.
Accordingly, rates of sale have been lowered as buyers are adopting a wait and see strategy. This is particularly relevant to the UK buyer. To compensate, developers have been proactive in the overseas market, particularly in China where there is still reasonable demand for good schemes. This is driven by many factors not least currency,’
As new construction is being planned one of the main issues for planning is the new Eliabeth Crossrail Line to begin service in 2018 running from Canary Wharf and Custom House stations to central London.
One development and one of London’s largest is Royal Docks expected to become the capital’s third financial district. This particular location will benefit form Crossrail and Docklands Railway.
“Over 1,100 new homes have been built in Royal Docks since the start of 2015.”
Development upon completion is is reported to bring : “Some five million square feet of commercial space and up to 21,000 jobs could be delivered at Silvertown in addition to some 3,000 new homes, while a further 30,000 jobs are anticipated in Royal Albert Docks, driven by the creation of a new Asian Business Port (ABP).”
The latest expectations of new available housing units are 17,000 with 8,220 now under construction and an additional 8,700 approved by planning commissions for an expected increase of 30,000 new residents in the next 10 years.
Another location having been re-purposed for residential and business development is Queen Elizabeth Park, the home of the 3012 Olympics. The Athletes Village has been developed for Build to Rent with 1,212 new units completed between 2015 and 2017.
As with any residential property expansion is the problem of affordable housing being constructed to meet the demand.
Charlie Hart at Knight Frank addresses the issue:
'We absolutely support the drive for the provision of more affordable housing and the industry, working alongside all levels of Government, need to become more creative. Currently there is little give in the system with all stakeholders looking to over capitalise their position at all stages of the delivery chain. We need to see more inclusive thinking and a move to longer term partnership arrangements with land owners contributing by treating the sale process as a long term investment and not a short term capital play.’