Q4 was a slower one for new build sales and development activity in London, with all three main metrics lower than Q4 2019, according to the latest data from Molior, shown in Table 1. Molior’s January report noted distinct patterns of behaviour across 2020’s four quarters, not all driven by the pandemic.
The impact of low numbers of corporate tenants and international students on the rental market has led to some caution amongst institutional build to rent investors, so bulk sales were relatively low again. Owner occupier demand remained relatively strong, but the second lockdown and Christmas break limited opportunities for in-person viewings.
Table 1: London Development Data Q4 2020
The annual time series data is shown below in Figure 1, with all three metrics relatively flat on this basis through 2020. In combination, this activity means there are over 60,000 units currently under construction across the capital.
Figure 1: Quarterly Development Trends, London
Weekly EPC data is now available for the full year and is shown in Figure 2 against the 2018-19 average. This shows a strong start to year, followed by the impact of the first lockdown in April and May. While activity returned to recent levels in Q3 and Q4, there was limited catch up. Output for 2020 was around 10% down on the 2018-19 average.
Figure 2: EPCs for new build in London, weekly
While the above analysis shows the pandemic has had a relatively small impact on sales demand, on the supply side the construction industry has seen some difficulties. ONS data shows that construction industry vacancies increased by 25% in the last quarter of 2020 to sit at 28,000, 8% above their level a year earlier. This is despite the rising overall unemployment rate across the whole economy.
The construction industry for residential development in London relies on a higher proportion of EU workers than other regions. Construction News magazine reported that their numbers have fallen significantly in the second half of 2020, meaning that Brexit could have a big impact on this sector, potentially limiting further growth in output.
Borough Level Data
The table below shows development activity by borough for the 12 months to Q4 2020 from Molior (sites with 20+ private units only), along with Help to Buy Equity Loan volumes to Q2.
Table 2: London Borough Development Activity, year to Q4 2020
Source: Molior, MHCLG