In its latest report on the central or prime London property market, EC Harris reveals that the number of units being planned has shot up from 15,446 last year.
But the cost consultant warns that there are growing risks from developer overcrowding and a shortage of specialist construction skills going forward.
According to the research there is now a pipeline of 150 major residential schemes planed for central London, with delivery expected to peak in 2017.
The authors say a dangerous property bubble is likely to be avoided because many are only proceeding when largely pre-let.
But it does warn that increased competition for sites, and rising construction costs could challenge the economics of more marginal schemes that are having to raise specifications to attract buyers.
Traditional prime residential specialists are now competing with volume house builders, commercial mixed-use developers and foreign investors looking to carry out development directly.
Mark Farmer, Head of Residential, EC Harris said: “The increasing challenge for investors and developers is to avoid over-paying for sites at a critical time when construction costs are increasing, the sales market is much more competitive and there is increasing scepticism about the real sustainability of rates of prime sales value growth seen in recent times.
“What has been a window of opportunity for developers over the last few years with reducing build costs and increasing sales values is rapidly closing and becoming a much more challenging environment.”
The pipeline of schemes running to 2022 is said to have a sales value of £50bn at today’s prices.
The number of projects coming through in traditional core prime central London such as Mayfair, Belgravia and Knightsbridge where schemes are over £1,650/ft2 value, appears fairly static
But there is a flurry of development plans for ‘edge of core prime’ areas in the wider central London market such as The South Bank, Bayswater and Paddington, Chelsea & Fulham and City and fringe.
Schemes at the lower end sales range at between £1,250/ft2 and £1,650/ft2 have ballooned in the last 12 months.
More than 4,600 additional units have entered the scope of the pipeline this year in this value band. This has come from a combination of new schemes together with existing schemes which have ‘leap frogged’ into the scope of the study due to significant sales value inflation.
Farmer warns there are clear dangers for developers against a backdrop of increasing cost uplift pressures exist and a much more indeterminate medium to long term sales market.
“Any softening of the market will be felt most by those developments which have aspirational values targets not underpinned by core location and quality fundamentals,” he added.
