The number of new homes built in London will reach record levels in 2017, according to high-end agency Savills - but more homes will complete unsold this year than at any time over the past decade.
Total net completions are expected to peak at 46,500 this year, ahead of the minimum 42,000 homes a year target set by the London Plan, but still well short of real housing demand, which Savills puts at 64,000 homes per year. Some 41,000 homes are thought to have been completed last year.
But Savills warns that what is being built currently does not match the shape of demand. The agency estimates that 58 per cent of demand is for homes costing less than £450 per square foot, yet this accounts for just 15 per cent of the five year build forecast.
It warns that over the next few years, private sector completions are forecast to fall sharply - that is based on falling start levels.
Sales have started to slow, meaning more homes will remain unsold on completion, particularly in the prime market. Between 2013 and 2016, 13,500 more homes were started than sold and Savills estimates that the number of unsold finished homes will total 2,800 this year, up from 1,000 last year.
The oversupply issue is particularly acute above £1,000 per square foot. While the mainstream market has been constrained by stretched affordability and changes to the taxation of buy to let investors, there were 1.6 starts for every sale above the £1,000psf price point during 2015 and 2016, accounting for almost half the 13,500 overshoot.
Since the peak of 2015, development starts have fallen sharply. Savills expects starts to total just 21,500 this year and fall to 18,000 annually over the next two years.
In turn, completions are forecast to fall to just 18,000 by 2021. The agency says that while this will allow high levels of supply in the private market to be absorbed, assuming sales rates are sustained, it will leave London chronically undersupplied in new homes.