Merryn's Blog

When supply goes up prices usually fall. Is London different?

The effects of the high cost of renting and buying in London has manifested itself in the city's housing market, says Merryn Somerset Webb.

I wrote a few weeks ago that if you leave a market alone, in the end it will sort itself out. High prices will bring on more supply and prices will fall. I added that this the supply bit at least - seems to be happening in London. Prices are high, rents are high. And what's happening? A visible effect on local supply.

"There are 1,000 flats coming here in White City. There are 5,000 at the Olympic Village, 7,500 on the way in Earls Court (maybe more), 5,000 at Battersea Power Station (the "real estate opportunity of a lifetime"), 800 at Lots Road, 700 in Ealing, 7,300 in Croydon, a few thousand more at King's Cross and 5,000 at the Royal London Docks and that's just the beginning of a long list."

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Since I wrote that, I see more and more signs of rising supply. There is this article from the Evening Standard on the way foreign governments are noticing that their embassies have turned into goldmines, and are therefore getting around to flogging them for luxury developments.

There has been an announcement of a new tower at Elephant and Castle (44 stories, 450 flats) on top of the 5,000-odd already planned. It may be that demand for London property is infinite and these tens of thousands of units are a drop in the ocean of need. But it will still be interesting to see what happens if a chunk of them reach completion just as interest rates rise in, say, 2015/2016.

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If you know of any big developments I have missed please pop them in the comments section below so we can have a go at adding it all up!

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