In central London's residential market, the stock of completed yet unsold units continues to rise steadily. By the end of September, the volume of this completed inventory had tripled compared to 2016 levels. In total, the overhang in central locations now amounts to 1,400 units, according to industry data reported by PropertyWire.
Drastic decline in construction starts in Zone 1
Alongside the increase in unsold inventory, the British capital has seen a sharp slump in the delivery of new schemes. The number of new construction starts in inner-city Zone 1 has fallen by 75 per cent over the past decade. This decline highlights growing caution among developers in the capital's historically most expensive locations.
Key drivers of this downturn are considered to be noticeably higher project costs and weakened buyer demand. Developers are confronted with changed economic conditions that place substantial pressure on viability assessments and margins for new-build projects in the prime segment.
Market adjustment in London's urban core
The combination of existing overhangs and sharply falling project starts marks a clear shift in central London. Whilst completions of schemes commenced earlier continue to feed through, resulting in the 1,400 unsold units, the future supply of completed housing in Zone 1 will be noticeably constrained over the coming years as a result of the slump in construction starts.
- —Completed, unsold units in central London have tripled since 2016 to reach 1,400 flats by the end of September
- —Construction starts in Zone 1 have dropped by 75 per cent over the past ten years
- —Rising construction costs and noticeably weaker demand are placing additional strain on developers
For local players, the current situation represents a phase of cautious consolidation. Market participants are preparing to work through existing stock gradually, whilst new construction schemes are being planned with great restraint against the backdrop of cost pressures and subdued demand.
