Large increases in demand for London housing over the next decade and beyond will not be matched by a rise in supply, according to independent research published by Cluttons, international property consultants and chartered surveyors, launched today.
This places unprecedented demand on the capital’s limited housing stock, pushing up prices and rents, with no sign of the supply side being able to match future demand. Those wishing to live in London can therefore expect to have to crowd up further, live in privately rented accommodation for longer or effectively be priced out of the market.
Since 2000, an extra 400,000 jobs have been created in London across a broad range of sectors. There are now more people employed in the capital than at the 2007 economic peak. The report argues that employment is expected to rise further over the next decade but jobs growth will be held back by a lack of housing. In addition, with house building still only at three-quarters of the level it was between 2000 and 2007, developers still face many challenges in terms of finance and land supply.
The report goes on to say that London has the highest concentration of renters in the UK. In fact, private renting in the capital has doubled in the last 20 years. A sharp rise in home prices, lending constraints, lifestyle changes and migration have all been contributory factors. Despite the fact that new jobs created in the capital over the next decade will be disproportionately skewed to the highly skilled and higher earning, a growing proportion of households will find themselves unable to access home ownership due to the supply / demand imbalance.
The research argues that the characteristics of Londoners living in the private-rented sector are gradually changing as they find themselves renting for longer, often well into the family rearing stages of their lives. Subsequently, the higher pace of rental growth will make the private-rented sector an increasingly attractive investment opportunity.
Julian Briant, head of residential consultancy division, Cluttons, said: “Decision makers have to question whether London’s potential to maintain its position as a world city is being curtailed by such a limited supply of housing stock. The answer can only be yes.
“Despite this, a growing and vibrant London offers a wide range of residential opportunities for both investors and developers. Small private landlords will continue to play an important role in the capital, including creating more units from the existing stock.
“However, the housing challenge we face needs radical solutions. Long term demand from highly qualified professionals at different stages of their careers and family lives presents a clear range of opportunities for investors taking a long view.”
Tony Pidgley, chairman, Berkeley Group, went on to say: “Housing can lead the recovery. The impact of delivering the shortfall in London alone would be 80,000 new jobs. But there is simply not enough urgency. We need clear government policy which encourages investment from home and aboard. London must welcome investors, not penalise them, if we want growth and prosperity”.
The research paper, ‘Renting in London: the coming boom’, is to be launched at the Cluttons Residential Breakfast Seminar on Tuesday 9 October. It was written on behalf of Cluttons by Professor Michael Ball from Henley Business School at the University of Reading.