Affordable housing output in London expected to fall

Despite a severe shortage of affordable homes in London, construction activity in the affordable housing sector in the capital is expected to fall, once the Olympics development is over, according to a new report from Drivers Jonas Deloitte.

The property consultancy's latest London Residential Crane Survey says that new homes building activity has increased across Greater London in the past year, particularly in East London, where the Olympic Games will take place.

The report highlights that there has been a 40% rise in residential construction activity since this time last year.

But the report suggests that there is growing evidence to show that momentum in the housebuilding industry has started to wane, due mainly to mounting economic uncertainty and regulatory changes, with the volume of new homes schemes falling since the last survey.

Anthony Duggan, Head of Research, Drivers Jonas Deloitte, said: "The survey paints a fairly positive picture of the residential development landscape in Greater London - nowhere more so than in the East.

"There is clear evidence of a significant rise in overall construction levels at a time when economic conditions could have led to developers holding back. Our latest survey records over 11,000 units under construction in the East of London alone.

"However, 2011 has seen the lowest levels of completions in this cycle, with fewer than 8,000 new homes completed in the last year. While the current development pipeline is looking considerably stronger for 2012, we would caution that some schemes due to complete this year are, in practice, likely to complete in 2013 or beyond."

According to the report, a total of 1,050 new homes were completed in East London, followed by 950 new homes in North London.

Housebuilders have focussed primarily on the construction of one- and two-bedroom flats, with houses accounting for just 5%, which is nowhere near enough houses for sale in relation to existing demand.

The percentage of affordable homes being delivered has fallen to 40% of all new homes, down from 50% a year ago.

Mathew Evans-Pollard, Head of London Development, Drivers Jonas Deloitte, said: "Developers may find it becomes harder to maintain construction activity at current levels as the year progresses. Consequently, the outlook for units to be completed in future years would worsen, leaving the actual provision of new housing in London to drift further away from government targets.

"Even in the boom years prior to the recent downturn, London saw little more than half of the government's desired 34,000 new homes complete each year. The shortfall in units completed has only increased since then.

"The likelihood is that construction activity will not be maintained at the current level during 2012."