Real Estate Investor Magazine South Africa Real Estate Investor Magazine - May 2017 | Page 52

INVESTOR INTELLIGENCE
Housing Deficit in London
Still the Key Market Driver
BY JAMES GLEW
L
ondon mayor, Sadiq Khan,
has
made
addressing
London’s
shortage
of
homes one of his top priorities.
He will be encouraged by the
housing delivery figures for 2016.
Leading indicators suggest 41,000
homes were completed. This is
the highest number of new homes
built since the 1930s and close to
the minimum target of 42,000 per
year. These numbers are fantastic
but they do not clear the backlog
from prior years and they fall a
long way short of the number
of new homes per year required
to support forecast employment
growth.
The following graph illustrates
how the housing deficit in London
has continued to grow over the
past 20 years.
SOURCE: HOUSING IN LONDON: 2017 REPORT GREATER LONDON AUTHORITY
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MAY 2017 SA Real Estate Investor
Since 1997 both London’s
population and economy have been
growing rapidly. Over the 20 years
from 1997 to 2016 the number of
jobs in London grew by 1.6m (or
40%), while the population grew
by 1.7m (or 25%). However, over
the same period, housing stock
only grew by 470,000 homes (or
15%).
Let’s look at the supply and
demand basics
Demand for housing in London
has outstripped supply. Demand
is up because London’s permanent
population is growing through
natural increase and migration
(from abroad and elsewhere in the
UK) and there is also a group of
wealthy foreigner buyers who want
a London home.
In terms of construction, the
rate of new-build has increased,
but still does not come close
to match the number of new
households in London—so in pure
numbers term, the housing deficit
is growing, which pushes up the
prices of the existing stock. Having
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