Starts, pricing, sales and launches declined again in the second quarter for prime new build residential in London.
JLL’s development update shows that while the central London residential new build market had shown signs of improvement in the first quarter, most metrics again softened in the second quarter, albeit marginally.
Key stats
Starts:
- Increased by 3.9% YoY
- Declined by 10.1% QoQ
Prices:
- Decreased by 1.7% YoY
- Flat at 0.0% QoQ
Sales:
- Increased by 8.2% YoY
- Declined by 3.3% QoQ
Launches
- Decreased by 17.6% YoY
Declined by 12.3% QoQ
Pricing growth of 0.1% in Q1 slowed to 0.0% in Q2. JLL said that pricing remains under pressure, though importantly there has been no further discounting compared to the year before. As a result, declines continued on an annual basis, but were far milder than they had been – up to 7% in 2016.
Sales were 2,359 for the quarter, which was a 3.3% decline on Q1. This means sales are down 8% on the year before, and 19% down on the 2013-2016 average.
The relatively steady rate of sales over the past quarter implies the market may have found a relatively robust rate of sale. JLL says there is a greater proportion of sales closer to or after completion, with owner-occupiers more active at this stage in the development cycle, which is helping to keep sales rates up.
Unit launches declined by a further 12.3%, driven by slowing sales and pricing. Developers that have been able to slow launches to protect pricing have done so.
Some 9,310 unit launches were made in the year to Q2 2017, 18% down on the year before and 36% below the Q1 2015 peak.
As launches have declined, so too have starts, while planning applications, though up on the quarter before, are hovering around the 12,000 mark.
The outlook, says JLL, is far more positive than might be expected given headwinds at play. It says developers could easily have “taken the axe” to operations given the more subdued and uncertain sales conditions, but the fact they have only slowed is encouraging.
It said, however, that the next 2-3 years are set to be unremarkable in terms of sales activity but “…given the wider political and economic turbulence, market participants will be happy to accept a relatively subdued but remarkably robust marketplace”.
To read the full report visit: http://residential.jll.co.uk/new-residential-thinking-home/research/central-london-development-report-sept-2017
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