This Market in Minutes focuses on the performance of Fulham and the prime south west London residential markets. Download here.
Strong rental market
The strength of the prime south west market is reinforced by the rental market in this location, which has outperformed all other prime areas of London. Prime south west rental property has seen a 2% annual increase compared to the -1.2% fall experienced in PCL. Lower corporate budgets have displaced demand for family houses from central London into less expensive markets such as in the south west, supplementing demand from a broader tenant profile.
Most tenants choose to rent in south west London because of relocation. Of those who have not needed to relocate, a much higher proportion rent out of choice than as a result of affordability.
Since 2011, international tenants have accounted for 46% of all lets, mostly North Americans and Western Europeans. Tenants working in the financial services sector are the most dominant although in the last two years the proportion of tenants working in financial services has decreased as the proportion of tenants working in media, information and science has increased.
Supply and demand
High levels of demand for housing in London are driven by levels of employment growth in excess of the UK average. This is due to a highly skilled and flexible workforce, London’s ongoing status as a global centre of finance, together with expansion of its world class higher education sector, leading to significant levels of in-migration and levels of income growth above the UK average.
Levels of demand vary across the market segments. Supply of prime new build stock is currently limited. However, there is a large pipeline of units due to be delivered into the prime markets in the next five years.
New developments in prime London are currently selling well, with evidence showing schemes selling out up to two years off plan, achieved through a combination of overseas and UK based launches. Our estimation of future supply now exceeds the previous peak delivery, meaning the development pipeline of prime schemes across London is entering uncharted territory.
There is very little development of new houses in London, especially in the more central areas where land values are much higher. In the borough of Hammersmith and Fulham there are currently only two schemes providing any new houses. London Square (SW6) currently has 40 houses under construction, and St Peters Place (W6) has seven houses that are all sold.
In addition, there are also two schemes, in the wider borough, with houses which have planning permission, although it is not unusual for schemes which have planning permission to remain un-built for many years. These are Palace Wharf (W6) with planning permission for five houses, and a scheme on Goldhawk Road (W12) with planning permission for 22 houses.
To help put this in context, in the borough of Hammersmith and Fulham, new build development of houses has accounted for 6.9% of all new build development over the past five years. Of the schemes where we have details of planning in the pipeline, houses account for just 6.2%, and it is unlikely all of these will be delivered in the next five years.
Our forecasts express our confidence in the residential markets over the long term, although we expect a period of slower growth during the UK election period.
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