This year has started with the lowest level of residential stockavailable for the last six years, when the house building industry wasfinally moving out of recession.'The office market is doing so well in prime parts of London thathousebuilders are being comprehensively outbid when sites become availableparticularly in the City and Midtown area where demand for officeaccommodation looks set to grow even stronger,' said Richard Donnell ananalyst with property consultant FPD Savills.

In some areas of London officerents soared by over 25% during the second half of 2000 increasingly forcinghousebuilders to look for opportunities elsewhere. The number of residentialdevelopments in central London, with 10 or more units, remained almoststatic during 2000.

Donnell said, 'Office developers are now being forced to consider schemes innon-core locations such as Paddington and the South Bank, heaping even morepressure on the house-builder which is likely to have a big impact on futureresidential supply as a large number of schemes in the supply pipeline haveplanning permission for both housing and offices.'

At present just over aquarter of the 197 residential schemes with planning consent in centralLondon also have consent for office use.The best chance of getting housing stock onto the books in the medium tolong term is through mixed residential and commercial schemes like those plannedat Elephant & Castle and Kings Cross.

'However, these should only be seen asemerging areas and supply in core venues will squeeze the supply pipelineever tighter forcing prices even higher,' said Donnell. 'Average salesvalues of £1,000 per sq ft may not be that far away.'