Property Futures

Real Estate News, Reviews and Investment

Developers forge ahead in the London area

News: London development is intense but polarized. 

Level of development

The bulk of construction work has been centered in and around the London area with developers’ attention focused on core and outer core areas.

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Areas of intense activity

  • The central London area boasted a year on year increase of 7,300 units, upping its construction score by 50%, the highest level recorded since the financial meltdown.
  • Analysts predict that the trend will continue through 2013, citing a 2% increase in 2013 scaling upwards to 8% by 2016 in core locations.
  • In central London, core and outer locations, the price growth across both core and outer locations averaged 3.5% with core locations up 4.1% and outer core areas up 2.9%.
  • While a lot of construction activity has progressed in the River market where 3,000 units are under construction, the East and City markets have been rated 2nd  and 3rd respectively in terms of planned volume of work and output. The availability of finance continues to be the constraining factor.

 

Factors fuelling heightened building activities

The level of activity in and around the London core and outer core areas has been heightened by increasing demand from various sectors.

 

Sources of demand

  • According to a report by Peter Murray, lead residential director at Jones Lang LaSalle, one prominent source has been the presence of buyers from overseas. Members of the group have grown in their selective expertise and they come from different networks worldwide.
  • Leaders of the group continue to be the Asia-Pacific purchasers but others are emerging from the Middle East with Turkey following closely behind them. Nevertheless, attention should also be paid to the domestic UK market which, according to the report, has gone through an uptrend and is expected to continue into 2013.

 

Polarization of construction work

The report asserts that while conditions are encouraging, construction work in the core and outer core locations of London is polarized.

 

Characteristics of more active sites

  • Some projects have reported extraordinary high sales levels while others have reported very minimal sales
  • Location is a determining factor in the selection of floor space. London is a core area with good transport links and the central part of the city continues to get the attention of developers. Still options must be chosen carefully.
  • In central London, there are now 14,250 units being constructed, with some having commenced in 2012 and developer sentiment is running so high that they see progress continuing into the future as an inevitable way to go.
  • According to Andrew Frost from the same real-estate agency, the dominant investors in the London area are volume developers who have strong balance sheets. These investors can outperform the smaller operators due to their ability to come up with more solutions to their real-estate development activities.

 

The above views point to the fact that the London core and outer-core areas are healthy and therefore attractive investing grounds for any investor with a long-term investment perspective.  The area shows real potential for future development.

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