According to commercial property consultancy, Drivers Jonas Deloitte, development activity across Greater London has risen in anticipation of the Olympic Games. 

The consultancy says that its latest London Residential Crane Survey (Winter 2011) highlights a 40% increase in construction activity since the same time last year. This is most apparent in the East of London, where the Olympic Games may have acted as a catalyst for development, with these boroughs showing the highest levels of residential construction. 

However, there is evidence that momentum has already begun to slow, says Deloitte. Economic uncertainty and regulatory changes mean that there has been a fall in the number of new schemes starting since the last survey. The report concludes that the recorded level of construction activity is unlikely to be sustained during 2012. 

Anthony Duggan, Head of Research, Drivers Jonas Deloitte, said: “The survey paints a fairly positive picture of the residential development landscape in Greater London – nowhere more so than in the East. There is clear evidence of a significant rise in overall construction levels at a time when economic conditions could have led to developers holding back. Our latest survey records over 11,000 units under construction in the East of London alone. 

“However, 2011 has seen the lowest levels of completions in this cycle, with fewer than 8,000 new homes completed in the last year. While the current development pipeline is looking considerably stronger for 2012, we would caution that some schemes due to complete this year are, in practice, likely to complete in 2013 or beyond.” 

The North and East of London saw the highest number of homes complete (950 and 1,050 respectively). The mix of completions is largely unchanged since the previous survey, with one and two bedroom flats dominating, and houses accounting for just 5%.  The fall in affordable housing development – down to less than 40% of the units in new schemes recorded in this survey, from over 50% a year ago – is another factor that could potentially dampen future construction activity.

Deloitte says, ongoing uncertainty about changes to the funding mechanism for affordable housing is likely to cause delays in homes being consented and completed. Deloitte suggests the viability of future schemes is also likely to be affected by the proposed introduction of a Mayoral Community Infrastructure Levy (CIL), and in addition, some boroughs will adopt their own CIL charging schedules. 

Mathew Evans-Pollard, Head of London Development said: “Land owners and developers will need to ensure that they are fully aware of the forthcoming changes, especially the tight timescale for adopting CIL, to avoid potentially serious consequences.    

“As a result, developers may find it becomes harder to maintain construction activity at current levels as the year progresses.  Consequently, the outlook for units to be completed in future years would worsen, leaving the actual provision of new housing in London to drift further away from government targets. “Even in the boom years prior to the recent downturn, London saw little more than half of the government’s desired 34,000 new homes complete each year.  

"The shortfall in units completed has only increased since then. Given the combination of the challenging economic backdrop, the introduction of the Mayoral CIL, and the changes taking place to the funding provisions for affordable housing, the likelihood is that construction activity will not be maintained at the current level during 2012”. 

Duggan added:“The existing shortage of housing in London is being compounded by increased demand and low levels of construction activity. The disconnect between supply and demand, coupled with strong pricing and a predicted dip in affordable housing provision, means that the private rental sector may be an option for longer than many potential homeowners desire."