Net additions to London’s housing stock fell by 20% last year following a sharp fall in office-to-residential conversions, according to Knight Frank.

Office-to-resi conversions fell by 52% to 2,993 units according to the latest London Residential Development Report, which said that “much of the most suitable space has already been converted since the Permitted Development Right was introduced in May 2013.”

The report pointed out that housing delivery remains “well above the pre-crisis average,” but added that the construction and planning pipeline “suggests delivery may fall further”.

It also found that house prices declined by 0.6% in 2017-18, while construction costs have risen 14% in three years which has put pressure on land values.

In addition, just five of London’s 33 boroughs met their targets for housing need during 2017-18 and twenty delivered less than half. Delivery of shared ownership via Section 106 has more than doubled in three years.

Patrick Gower, residential research associate at Knight Frank said: “The market faces structural challenges that are suppressing long term sales activity, including stretched affordability, tighter mortgage regulations introduced in the wake of the financial crisis, and patchy house price growth – though reports, including the latest RICS sentiment survey, indicate January was a stronger month than November and December.

“These factors, and a challenging policy environment have also weighed on residential construction. Upward momentum in annual housing delivery that had continued unabated since 2012-13, reversed in 2017-18, with the number of dwellings added to total housing stock in the capital, including conversions and change of use, falling 20% compared with the previous year.”