The recent expansion of the London housing market has many benefits in addition to the new houses being built.

( — September 25, 2015) — As most of the capital’s commuters will be witnessing each morning, London is currently in the grip of a construction boom. The skyline of the South-London area Battersea in particular is currently punctuated with cranes involved in housing developments like the much-discussed Embassy Gardens.

A common complaint made about cranes is that they ruin an otherwise attractive cityscape. Judging from a blog by Emerson Crane Hire, a leading London-based crane hire company, their presence is far more preferable to the alternative as they tend to indicate economic growth. 

While there’s certainly a huge financial incentive for building property in London, it’s also entirely necessary for both residential and commercial purposes too. 

Following February’s news that London’s population has surpassed its 1939 peak of 8.6m inhabitants, it’s clear that there will be a growing need for housing. And for businesses, London’s recent emergence as the world’s leading financial centre will make it even more desirable. 

Demand in London’s residential and commercial property sectors is keeping a strained supply chain at full strength. With a property market that shows a number of issues – from people needing housing, to businesses requiring office space and companies being forced to pay expensive business rates – what does the future hold for London-based construction?  

London’s construction costs are world’s second highest and escalating 

London’s property price growth has been driven up by both high demand and increasing construction costs. According to research by Turner & Townsend, New York is the most expensive city for construction but London, despite having a workforce nearly 70% cheaper, is a very close second. 

As demand continues to outweigh capacity, costs could easily escalate and London may soon take NYC’s place. Couple this with the fact that London is also the most expensive city in the world for business space and it’s not hard to see why some larger organisations could find the expense difficult to justify. 

Some developers may find that the spiralling costs leave them with an expensive property that nobody wants. As the vacant property security specialists Oaksure Property Protection comment on business rates relief, it is “double the burden to lose the revenue from a tenant and then also have to cover the full business rates for the property before it is re-let, sold or redeveloped”. 

Market intelligence from Leisure property experts Fleurets suggests that the Capital could also become tricky territory for startups, SMEs and entrepreneurs as well due to the city becoming “overheated and overcompetitive”.

Property in London still being snapped up by wealthy investors

Even though property prices and construction costs are continuing along their increasingly upward trajectory, London remains ever the popular investment market. But only for the world’s wealthiest.

Thanks to China’s stock market bubble bursting over the summer, interest in London’s property was significantly boosted. Evidence suggests that Chinese buyers in particular have stepped up their interest in ‘safe haven’ global property markets like London says Tom Bill, the head of London residential research at Knight Frank.

The current situation in China could have a profound impact on the property market as it starts to absorb huge amounts of money again. However, taking the recent construction and property price growth into consideration, investors facing losses on their stock market portfolios could start to find property investment more challenging.