Despite this, developers of all types have continued to seek out opportunities, and a lack of sites available to purchase has halted the decline in land values in central London. 

Demand has been supported by a variety of factors; housebuilders in outer London have continued to see positive sales volumes, aided by Help to Buy, demand for institutional grade PRS continues to surge among and increasingly international group of investors, and resilience at the top end of the central London market points to a shortage of super-prime new homes in years to come. 

These are some of the big themes explored in Knight Frank’s latest residential development report, published today. Four of the key takeaways include: 

1. Help to Buy sales are gathering pace

Some 6,115 homes were purchased under the Help to Buy Equity Loan Scheme in London during the year to March 2019, up 30% on the same period a year earlier. 

The government in November announced it would restrict the scheme to first-time buyers and add regional price caps, while keeping London’s price cap at £600,000. A greater proportion of first-time buyers use the scheme in London, at 95%, compared to the wider country, at 91%, giving developers to confidence to continue investing in land. 

2. Super prime buyers are increasingly opting for new homes

Back in late 2016 new homes accounted for less than 20% of total super prime (£10m+) sales. During the year through Q2 2019 new homes’ share of sales had climbed to 34%. This is, in part, because there have been more units to buy, following a 2016 peak in total completions in Kensington and Chelsea and Westminster of 1,087, which almost halved to 540 in 2018. 

The trend is also about a shift in tastes, and prime buyers are increasingly focused on securing a new home due to the high level of security and amenities they offer, according to Rupert des Forges, Knight Frank’s head of Prime Central London Developments.

Several high-profile schemes have sold out in recent months, and the current planning pipeline points to constrained supply on the horizon.

3. More than a quarter of all units started this year were part of investment-grade PRS projects

The market for purpose-built rental stock in London took off from a standing start a decade ago, driven by seismic demographic changes and demand from investors from North America for stabilised blocks. At the end of Q2, purpose-built rental blocks of more than 100 private units accounted for 28% of all private construction starts, up from 21% in 2015.

Analysis of planning data suggests that delivery of large PRS projects is likely to increase over the medium-term. Some 6,816 units were approved in schemes of at least 100 units during the first six months of 2019, and increase of more than 20% year-on-year.

4. The construction pipeline suggest completions will remain suppressed in years to come

There were 20% fewer net additional dwellings delivered in Greater London during 2017/18 completed to a year before. The planning pipeline suggests delivery will remain well below the Mayor’s target of 66,000 homes a year.

The number of units given consent ticked up at the turn of the year, to almost 42,000 units during the 12 months to Q2, with the data in inner London flattered by a handful of large projects in Wandsworth and Tower Hamlets.

A little more than 9,000 units were started during the first half of 2019. If that is repeated during the rest of the year, developers will commence fewer than two thirds of the units started during the 2015 peak.