In fact Jennet Siebrits, head of residential research at CBRE Residential, said that even though this tailing off of development will impact upon house prices, it will not cause them to crash.
Instead Siebrits said that prices will actually increase by 3 per cent due to a lower volume of transactions.
In response to the latest set of Department for Communities and Local Government (DCLG) statistics showing that builders were beginning work on 10 per cent less properties today than in 2006, CBRE Residential has pinpointed the 'critical factors' hampering this necessary growth in construction.
Rising land and build costs, 'empty' planning permissions and squeezed affordability have all been singled out as key reasons to indicate why construction is veering off target.
“Between 1999 and 2003, land values doubled in London, with build costs rising at around double the rate of inflation," said Siebrits.
"While this has been easily absorbed by rising house prices, faced with weaker market conditions and the prospect of much lower, if any, house price growth, this is likely to become an increasingly stringent barrier to building."
Siebrits added that the rise in 'empty' planning permissions was further compounding the problem: “In some cases, schemes have been approved but the Section 106 agreement is too onerous to deliver, creating a new category of 'empty permissions.'
"For example, the negotiation behind the average Section 106 agreement in London takes on average 345 days to complete. It takes even longer – 531 days – for large scheme. This delay represents a significant barrier to building new residential developments.”
