Despite the fact that London is in the grip of what is considered to be its worse housing shortage in decades, data from the third quarter has shown that housebuilder activity has dropped to its lowest level in 20 years. The figures, released by The National House Building Council, show that between July and September the number of registrations for new homes to be built in the capital dropped to 2494. That represents a 35% drop on the registrations over the same quarter last year and is another indication that property investment in London has hit a lull.
Registrations for the construction of new homes are made when the homebuilder plans to start building work within a few weeks to months and can be volatile in the capital as larger projects can significantly influence quarterly figures. However, the trend of property investment activity in new builds goes deeper than Q3 with registrations over the full year-to-date down 9% on last year. While nowhere as severe as the 35% drop in Q3, it does reflect lower investor confidence around the London property than at any time in recent history.
The most recent edition of the Hometrack UK Cities House Price Index showed that growth across London was down to 2.3% in September, making it one of poorer performing urban locations in the UK. Other figures have indicated recent price drops in London, with prime London prices most effected. In September, a Rightmove study showed asking prices in the capital had dropped 3.2% between August and September and were set for their biggest annual fall in a decade.
In recent years London has seen the highest property price growth in the UK with other regions, particularly in the north, lagging well behind. However, the tables have now turned with most other regions of the UK showing growth and London prices dropping. That appears to now be being reflected in new build property investment activity from homebuilders. Across the UK as whole, registrations for new homes over the same August to September period increased to their highest rate in 10 years, up to 37,963 from 29,083 last year.
No major crash in London house prices is expected and the current lull is considered to be a logical correction following several years of intense rises. House prices in the capital are expected to see very low to slightly negative growth over the next 2 to 3 years. However, after that they are expected to bounce back strongly and by 2020/21 London is again forecast to be the area of the UK with strongest growth.