The upcoming general election is impacting on the Central London development market. But how is it manifesting itself and what are the other influences and trends?
Well, developers seem to be carrying on regardless of the election, buoyed by the strong sales market of the past few years, although some say they have cut back on delivery pending the election outcome.
It is interesting to hear that Central London developers regard the general election result as crucial to their businesses and also that the vast majority believe that this vote is more important than the London Mayoral election in 2016.
These findings come from a JLL survey of London developers for our latest Central London Residential Development Publication – Waiting Game.
Evidence of developer enthusiasm is clear.
There are now 26,500 units under construction in Central London – a 23% rise during the second half of 2014 and an astounding 41% increase throughout the course of 2014. The majority of units underway are in Outer Core locations where there was a 34% increase in the second half of last year with Core markets seeing a more modest increment of 8%.
So the rise in development activity is continuing on its upward path.
The general election, as well as influences such as CGT for overseas owners, the recent Stamp Duty reforms and Labour’s threat of a Mansion Tax are all pressing on the sales market.
Overall, buyer demand has picked up in the first few months of 2015 with the market below £1m still very active.
However, conditions are more subdued in the £1.5m to £5m range where Stamp Duty and Mansion Tax influences are greatest. However, this market should liberate somewhat after May’s vote.
As is often the case, especially in the higher value parts of London, a general election leads to people sitting on their hands as they await greater certainty. But even after the election we are not anticipating a return to the buoyancy of early 2014. We believe that the Central London sales market will be in a more “normal” state with an active marketplace and with reasonably modest positive price growth. But, while more subdued compared with some other times, the key will be a more sustainable market.
A similar picture will be evident in terms of development.
The surge in construction activity will plateau in response to a more “normal” sales market. And our survey suggests that this is already in train. Developer enthusiasm to progress their schemes through planning and start on site has dipped from an average score of 9.0 out of 10 at the end of 2013 to 7.4 at the end of 2014, according to our latest survey.
So, it looks like we will all be happier once the election is over. We all prefer greater certainty.