London development Q3 2020

Activity levels in the London development market bounced back strongly in Q3 across all three main metrics (starts, completions and sales), according to Molior data as shown in Table 1. This suggests the impact of lockdown was short-lived and contained to the previous quarter.

Molior reported that the sales demand was driven by private buyers, with bulk sales to investors or PRS operators ‘relatively muted’. They also noted that Help to Buy was particularly important in driving sales in Q3, along with the SDLT holiday.

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The annual time series data is shown below in Figure 1, with sales improving strongly on this basis over the past 18 months and the other measures continuing in line with recent levels.

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The weekly EPC data from MHCLG gives another perspective on the extent of the shutdown and subsequent recovery. A comparison of data for 2020 so far to the 2018-19 average (Figure 2) shows that the number of weekly EPCs on new build homes in London quickly returned its normal level around week 24 (mid-June), and has carried on in line since then.

Comparing the two trajectories shows 3,500 fewer new build EPCs in 2020 so far, a 10% fall. If the rest of the year continued in-line with the 2018-19 average, then the total number of new build EPCs in 2020 would be around 36,000 – 9% lower.

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While sales and construction activity in London has fared relatively well through the pandemic so far, the wider industry continues to face many risks. COVID-19 does not appear to be going away and many major employers in London have extended their instructions for staff to work from home. Changing working patterns could reduce the demand for both commercial and residential property in the capital in the longer term.

In January, the Brexit transition period will end and the lack of a trade deal, which appears the likeliest scenario, could start to impact labour and materials supply in the immediate term. Longer-term London’s status as an international financial hub may be threatened. On the positive side, Molior noted in their Q3 sales report that the hoped-for interest from Hong Kong citizens has started to appear.

Borough level data

The table below shows development activity by borough for the 12 months to Q3 2020 from Molior (sites with 20+ private units only), along with Help to Buy Equity Loan volumes to Q1 (HTB figures have not been updated this quarter).

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