HOUSEBUILDING REPORT 2018 - RESIDENTIAL RESEARCH - R S - Knight Frank
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RESIDENTIAL RESEARCH
HOUSEBUILDING
REPORT 2018 E VEY
IV R
LUS R SU
C E
EX UILD 8
1
SEB 20
U
HO
HOUSING SUPPLY POLICY DEVELOPMENTS SECTOR OUTLOOKKEY SURVEY MARKET UPDATE
FINDINGS The Housebuilder Survey examines the opportunities and
challenges ahead for the development sector. It comes at a
It is achievable to build 200,000 febrile time for housing policy, and also as the trends for
- 250,000 net additional homes
price growth across the country are changing.
each year, according to 61%
of respondents. Just 1% say it’s The housebuilding industry has responded London and the South East, as has been the
possible to surpass 300,000 by 2022. strongly to the demand for new housing, case in recent years. This more fully reflects
increasing output by 55% over the last five the economic recovery seen outside London,
The large majority of volume years. Our annual survey aims to give a especially in major cities. In fact, official
housebuilders plan to increase snapshot of where the sector is now, and government data shows that housing starts
construction starts this year. Most where future opportunities and hurdles lie. over the last 18 months in Manchester and
small developers intend to decrease It reflects the views of respondents from more Birmingham reached highs not seen since
activity or leave output unchanged. than 100 housebuilders and developers, before the global financial crisis.
ranging from FTSE100 companies to firms Housebuilders are generally upbeat about
Half of respondents say the building fewer than 10 homes a year. the opportunities to build more in the coming
Help to Buy Equity Loan Scheme Together, the respondents account for almost
years, according to our survey, although the
three quarters of all homes built across the
should end via a tapered majority feel that meeting the 300,000 target
country each year.
withdrawal starting in 2021. every year will be a stretch.
The survey comes at a key time for housing
An increasingly diverse array of tenures now
Planning remains the main barrier policy, with another new housing minister
play a vital role in satisfying housing demand,
to speeding up housing delivery, (FIG1) and a raft of consultations and new
particularly the build-to-rent sector across
rules set to be introduced in the coming year
respondents say, although the cities and town centres. There are also
(see timeline on page 6). Many of these
proportion identifying the planning changes, especially those that focus on increasing opportunities across the sector
system as a hurdle has fallen since providing infrastructure, amenities and for joint ventures, working with Registered
last year. Affordable Homes, will be welcomed, Providers and Local Councils to provide new
however the policy overhaul comes at a time homes. As is clear from the survey, alternative
Respondents said outer London, of wider political and economic uncertainty. methods of construction are also set to have
the South East and the West an impact on the sector.
In terms of house prices, the picture across
Midlands present the greatest the UK is changing, with a more evenly- As for future opportunities, housebuilders
opportunities for housebuilders spread rate of growth across the country, in have their eyes on most parts of the country –
during the next three years. contrast to growth being concentrated in as shown in the map on 8.
FIGURE 1
UK housing transactions and policy changes
2007-2018
Housing Yvette Caroline Margaret John Grant Mark Kris Brandon Gavin Alok Dominic
Ministers: Cooper Flint Beckett Healey Shapps Prisk Hopkins Lewis Barwell Sharma Raab
175000 Financial Crisis Help to Buy
Help to Buy Stamp duty abolished
Equity loan London launched for FTBs up to £300k
launched Stamp duty reformed,
150000 Stamp Duty hol ends rates rise to 12% 2017
above £1.5m General
Help to Buy
Election
Monthly transactions (E&W)
Mortgage Guarantee
Stamp Duty Stamp Duty raised launched
125000 Stamp Duty holiday rises to 5% to 7% for £2m+
up to £175,000 £1m+
NewBuy Guarantee
Number
launched
100000
General
75000 Scottish Election
Referendum Housing
General White Paper
Election 3% Stamp Duty Vote to
50000 surcharge for leave EU
FTBs Stamp Duty FTBs Stamp Funding for
Lending starts additional properties
hol up to £250,000 Duty hol ends
25000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Knight Frank Research/HMRC FTB = First-time buyer otice at the end of this report
2 Please refer to the important notice at the end of this reportHOUSEBUILDING 2018 RESIDENTIAL RESEARCH
Supply
In 2013, Mark Prisk, the then housing But there is more to do. Ministers are
minister, lamented the UK’s undersupply targeting 300,000 additional homes a
of housing and pledged to accelerate year by the middle of the next decade –
building to the fastest rate in more than a 38% increase from current levels. Delivery
20 years. looks set to climb in the short term, and the FIGURE 3
Office for Budget Responsibility (OBR) has What levels of net supply of housing
At the time, housebuilding was in the do you believe will be achievable
forecast net additions will reach 257,600
depths of the post-crisis trough, with just and sustainable in England on an
this year. Maintaining these levels of annual basis by 2022, under current
120,000 new homes being built every
year. Hitting 180,000 completions housebuilding will be a challenge however. market conditions?
seemed a stretch. However, in the five The OBR is forecasting net additional
years since Mr Prisk’s remarks, new-build dwellings will plateau at about 240,000
1% 300,000+
completions have climbed steadily, rising between 2020 and 2023 (FIG 2).
250,000-
by 55%. Responses from the housebuilder survey 13% 300,000
Taking into account conversions and echo this outlook. Some 61% of
respondents said between 200,000
change of use, such as permitted
and 250,000 net additional homes are
development rights (PDR) – transforming
achievable and sustainable by 2022, should
commercial space into homes – the
current market conditions persist.
number of dwellings added during
2016-17 stood at 217,350. A quarter believe net supply will be fewer
200,000-
Much of the increase can be attributed to
than 200,000, and 13% said levels would
reach 250,000-300,000. Only 1% of
61% 250,000
an improving economic picture, though
respondents thought more than 300,000
continued support for Help to Buy has
was achievable by 2022 (FIG 3).
enabled some buyers to circumvent the Fewer than
‘deposit gap’ when buying a home, Developers, housing associations and local 25% 200,000
thereby underpinning confidence among authorities in England started 163,000
developers to commit to large schemes. homes in 2016/17 (FIG 4). In terms of their Source: Knight Frank Housebuilder Survey
FIGURE 2
Housing supply
Net additional dwellings, England
New build completions Net conversions Net change of use Net additional dwellings
Demolitions Adjustment to Census 2011 Net other gains OBR Forecast
300,000
OBR FORECASTS
250,000
200,000
150,000
100,000
50,000
0
-50,000
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
Source: Knight Frank Research/MHCLG
3FIGURE 4
New-build housing starts, England MODULAR
350,000 Modular construction has long been
Private enterprise Housing Association Local Authorities hailed as a potential game changer
300,000 that may help the industry get closer
to reaching the government’s
250,000 ambitious construction targets.
Impetus on the sector has been
200,000
further renewed in the past two years
prompted by fears of a shortage of
150,000
skilled construction workers due to
100,000
Brexit and an aging workforce, and
the rising costs of traditional building
50,000 materials, particularly bricks.
Respondents to the survey were
0
sceptical about the impact modular
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
construction could have on supply in
the short-term. Half expected the
Source: Knight Frank Research/DCLG
industry to “moderately” contribute to
overall supply, while 43% said it
own businesses, 61% of survey respondents Developers that build more than 1,000
would have no impact on supply at all.
said they expected to increase the number homes every year overwhelmingly
of units started during the next 12 months, However, the picture changes
suggested they would be ramping up
compared to the previous 12, but that dramatically when respondents
production during the coming year, with
headline figure hides a split between the considered the opportunities over
92% stating that intended to increase the longer term. Nearly nine in ten
outlook of larger housebuilders and SMEs.
starts (FIG 5). respondents said it would boost
In recent decades housing supply has supply in five years’ time, with more
Among developers that produce 100 homes
become more dependent on a small number than a quarter saying it would have a
a year or fewer, 43% said they would
of very large developers and, despite an significant impact (FIG 6).
increasingly favourable policy environment increase starts during the coming year,
for SMEs, responses to the survey suggest while 31% said they would leave production
FIGURE 6
most plan to build the same amount of unchanged and 26% said they would start
What impact do you think
homes or fewer over the coming 12 months. fewer homes. modular or pre-manufactured
housing will have on supply?
FIGURE 5
In terms of the activity of your business over the next 12 months, compared
to 2017/18, you expect start volumes to… Significantly Moderately No Impact
Increase Increase
IN THE NEAR FUTURE (1-2 YEARS)?
DEVELOPERS OF 1000+ UNITS PER ANNUM
8% 92%
INCREASE
REMAIN
UNCHANGED IN THE LONG TERM (5 YEARS+)?
DEVELOPERS OF FEWER THAN 100 UNITS PER ANNUM
26%
DECREASE
31 %
REMAIN UNCHANGED
43%
INCREASE
Source: Knight Frank Housebuilder Survey
4HOUSEBUILDING 2018 RESIDENTIAL RESEARCH
Affordable Housing
Delivery of Affordable Housing has grown in assessments in the decision-making stage Several build-to-rent developers said
importance both politically and economically of development. regional governments would need to be
as affordability constraints have tightened, flexible if they hoped to attract a diverse
The majority of respondents to the survey,
particularly in large cities. The number of range of tenures. (FIG 8).
at (55%), said the Mayor’s approach could,
Affordable Homes built in England in 2015-16
if applied on a national basis, hinder the We also asked whether developers favoured
fell to its lowest level in 24 years amid rising
delivery of Affordable Homes. Respondents
private new build completions, before partially this threshold approach to Affordable
suggested any threshold would need to be
recovering to 41,530 the following year (FIG 7). Housing provided the target was set clearly
set locally, allowing some flexibility where
needed, otherwise there was a risk that the and adhered to. Interestingly, this time most
Unsurprisingly, responses to our survey
overall delivery of Affordable Homes could respondents, at 62%, agreed, with many
tallied closely with developer’s outlook for
private housing starts with 92% of large decrease. Many respondents said it was favouring that approach due to its
developers (1000+ units) stating they important that the system maintained some transparency, and the likelihood it would
expected delivery of Affordable Homes to option to negotiate. make bidding for land more competitive.
rise during the coming year.
FIGURE 7
Of developers building 100 homes or fewer, Changing mix of Affordable Housing completions
26% said they expected Affordable Housing
delivery to increase, with 54% expecting it to 80,000
Social Rent Affordable Rent Intermediate Rent
remain unchanged. Affordable Home Ownership Shared ownership
70,000
The government and the Greater London
60,000
Authority have sought to increase delivery
by making policy changes aimed at reducing 50,000
the use of viability assessments. In London,
40,000
Mayor Sadiq Khan introduced a threshold of
35% Affordable Homes that would enable 30,000
developers to fast-track through the planning
20,000
system. The intention is to give clarity to
LONDON MAYOR SADIQ KHAN 10,000
HAS LAUNCHED A “FAST-TRACK” THROUGH PLANNING
developers over what they could pay for
FOR SCHEMES THAT MEET A0 35% THRESHOLD OF AFFORDABLE HOMES.
land, while simplifying and speeding up the
development process.
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17P
you think
Thethis threshold
draft revised approach
NPPF has followed suit,to
andplanning, Do you favour a threshold approach to
applied on a national
is seeking basis,
to move away could result Source:
from viability in anKnight Frank Research/MHCLG.
Affordable
P = provisional Housing, provided the target is set
ncrease in the delivery of affordable homes? clearly and adhered to?
LONDON
S LAUNCHED A “FAST-TRACK” MAYOR
THROUGH PLANNING SADIQ KHAN HAS LAUNCHED A “FAST-TRACK” THROUGH
LONDON PLANNING
MAYOR SADIQ KHAN HAS LAUNCHED A “FAST-T
35% THRESHOLD FOR SCHEMES
FIGURE 8OF AFFORDABLE HOMES.
“35% on site is THAT MEET A 35% THRESHOLD OF AFFORDABLE HOMES.
FOR SCHEMES THAT MEET A 35% THRESHOLD OF
unsustainable vs the
ng, Do you favour a threshold approach to Do you think this threshold approach to planning,
anDo you thinkAffordable
this threshold approach to planning, if applied onDo you favour a threshold
result in an approach toAf
cost of purchasing
Housing,
the provided the target is set a national basis, could
62%
land.”
? if applied on a national basis,
clearly couldto?
and adhered result in an Affordable
increase in the Housing,
delivery
“Provides uniformity and of provided
affordable homes? the target is s
increase in the delivery of affordable homes? clearly and adhered to?
45%
55%
levels the the playing
field for large and small
YES
“Everyone has a clear
YES
“35% on site is
housebuilders such unsustainable vs the
target to achieve as ourselves.” cost of purchasing
“35% on site is g land bids
NO
makin
62%
the land.”
“Provides uniformity and unsustainablemore
vs the
competitive.” “Provid
55%
levels the the playing level
field for large and small cost of purchasing field fo
YES
3462
a clear housebuilders such the land.” “Everyone has a clear hou
hieve
45%
as ourselves.”
1 “Provides uniformity and
% %
target to achieve as
NO
making land bids
55
bids levels the the playing more competitive.”
itive.”
field for large and small
e “fast-track” does %YES 34% “Everyone has a clear
target to achieve
housebuilders such
as ourselves.”
45% YES
NO
NO
ot speed up the making land bids
lanning process NO“It provides certainty
more competitive.”
“The “fast-track” does YES “A blanket threshold
is not sensible when
ficiently to make it to developers,as not speed up the
“A blanket threshold the variations in sites
yan incentive for
planning process
45%
well asisharmonises
notPLANNING
sensible when “It provides certainty
34%
developers.” sufficiently to make it currently amount to
to developers,as
landthe variations in sites
values.”
currently amount to
an incentive for well as harmonisesbetween 10%
developers.” land values.” and 50%.”
between 10%
“The “fast-track” does YES and 50%.”
NO
not speed up the
S SHOWN ARE EXAMPLE RESPONSES FROM SURVEY
planning process QUOTES SHOWN ARE EXAMPLE RESPONSES FROM SURVEY “A blanket threshold
QUOTES SHOWN ARE EXAMPLE RESPONSES FR
“It provides certainty is not sensible when
sufficiently to make it to developers,as
an incentive for The "fast-track" does the variations in sites
The "fast-track" does well as harmonises currently5 amount to
developers.” land values.”
not speed up the
planning process between 10%FIGURE 9
The Help to Buy Equity Loan ends in
Policy Help to Buy
Nearly half of respondents (46%) said
2021 and, if current market conditions There have been myriad policy
ending the scheme in 2021 would have a
persist, how will this affect the number announcements and consultations over the
of homes your business delivers? negative impact on the supply of homes
last few years around housebuilding,
they were able to deliver, while 47% said
starting with the publication of the Housing
that it would have no impact (FIG 9).
SIGNIFICANT MODERATE
White Paper in February 2017, and
INCREASE
2% INCREASE including an announcement of a Social More large developers say that the end of
5%
Housing Green Paper, a draft revised the scheme will affect output, with some
National Planning Policy Framework, a new 85% of developers who deliver 500+
draft London plan and a review into UK homes a year saying that supply will fall
SIGNIFICANT housebuilding by Sir Oliver Letwin MP. modestly or significantly. In contrast,
DECREASE
20% some 20% of developers delivering up to
The results of these different approaches
100 units a year say that their production
will emerge over the rest of 2018, but
levels will fall, with two-thirds (65%)
perhaps a key policy decision for
saying their output will remain the same.
MODERATE REMAIN housebuilders is Help to Buy, and what will
DECREASE UNCHANGED
26% 47% happen to the Equity Loan scheme
designed to help buyers bridge the FIGURE 11
‘deposit gap’ after it is slated to end in What do you think should happen
2021. Since the scheme was introduced in to the Help to Buy Equity Loan
2013, around 160,000 home buyers have scheme after 2021?
taken out an Equity Loan, with around 80%
of these being first-time buyers.
FIGURE 10
What are the key barriers to speeding up delivery? 50%
THERE SHOULD BE A PHASED
TRANSITION IN PLACE, WITH A VIEW
TO ENDING THE SCHEME EVENTUALLY
1 2 3 4 5 6 7 8
36%
THE SCHEME SHOULD
CONTINUE INDEFINITELY
PLANNING LABOUR ACCESS TO ABSORPTION LIMITED ACCESS TO SITE LAND
14%
THE HELP TO BUY
AVAILABILITY DEVELOPMENT RATES LOCAL MATERIALS LOGISTICS REMEDIATION EQUITY LOAN
FINANCE INFRASTRUCTURE DIFFICULTIES SCHEME SHOULD
END IN 2021
CONSULTATIONS AND POLICY DEVELOPMENTS
FIGURE 13
Revised draft National
Planning Policy Framework
Planning for the
CONSULTATION OPENS
right homes in
the right places Supported housing delivery
CONSULTATION OPENS through developer contributions
Fixing Our Broken Draft new London Plan James Brokenshire
CONSULTATION OPENS
Housing Market Social Housing CONSULTATION OPENS MHCLG created, becomes Secretary of State
(White Paper) Green Paper Dominic Raab becomes Letwin Review terms of for Housing Communities
CONSULTATION OPENS announced Letwin Review announced Housing Minister reference published and Local Govt
FEBRUARY SEPTEMBER NOVEMBER JANUARY MARCH APRIL
2017 2017 2017 2018 2018 2018
6HOUSEBUILDING 2018 RESIDENTIAL RESEARCH
The expectation that ending the Help to Another announcement expected towards
FIGURE 12
Buy Equity Loan could affect delivery the end of the year is the plan drawn up by
What do you perceive are the biggest
does not simply translate into a plea for Sir Oliver Letwin aimed at increasing the
risks to your business from Brexit?
Help to Buy to continue, however. Just speed of housebuilding. His independent
over a third of all respondents (36%) to review of build out rates was announced at
our survey said that the scheme should the Autumn Budget in 2017. Since then he
continue indefinitely (FIG 11). Two-thirds has made an1.an initial report and published
of respondents said the scheme should his draft analysis, in which he explains that
there will be a focus on encouraging a range
1. UNCERTAIN
end, although these were split between
of housing design as well as tenures on
ECONOMY
those who called for a tapered withdrawal
of the scheme (50%) and those who said 2. Letwin Review focuses on
sites. While the
it should end completely at some point in challenges after the planning process is 1. UN
1. 2.
2021 (14%).
3. 1. 2.
complete, when asked about the barriers to
speeding up development, our respondents
still identified planning issues as the biggest
2. LABOUR
AVAILABILITY
EC
3. ACCESS TO
hurdle, with 39% identifying it as the top
issue (FIG 10).
MATERIALS 2. LA
AV
However, it is worth noting that in previous
Whatever ministers decide, years, a much larger proportion of 3. ACCESS TO
respondents identified planning as a barrier MATERIALS 3. AC
UNCERTAIN
ECONOMY
they must
LABOUR
AVAILABILITY
ACCESSspeak
TO
MATERIALS
up UNCERTAIN to activity,
ECONOMY
LABOUR ACCESS
suggesting
AVAILABILITY
thatTO
MATERIALS
the planning
M
soon if they are to avoid landscape, while still challenging, may
be easing.
weighing on the supply of
homes. The industry has The future their business during the next three years.
The South East, London zones 3-6 and the
shown itself capable of The performance of the UK property market West Midlands were picked as the top three
adapting to change, but has shifted during the past 12 months. The hotspots (FIG 14).
north/south divide in terms of house price
businesses in every performance has narrowed, with mainstream
Among the volume builders (1000+ units) the
South East and West Midlands were picked
sector strain to operate markets across the Midlands, South West
and Scotland outperforming.
as the most significant opportunity areas in
amid policy uncertainty.” Some of these shifts have been
the coming years.
exacerbated by tax changes. Successive Respondents to the survey were asked for
JUSTIN GAZE
HEAD OF RESIDENTIAL DEVELOPMENT LAND, changes to stamp duty, for example, have their opinions on Brexit. The majority said
KNIGHT FRANK, ON THE FUTURE resulted in a significant decline in new that an uncertain economy was the greatest
OF HELP TO BUY risk of the process of the UK leaving the EU.
projects starting in inner London, since a
2015 peak.
This was followed by labour availability
We asked our respondents to list the regions and then access to materials (FIG 12).
in which they saw the greatest opportunity to London-focussed developers are likely to
Local Council Elections
(inc. Mayoral elections
Autumn Budget
in Hackney, Lewisham,
Watford, Newham & Letwin Review draft Revised NPPF due to Letwin final Social Housing Final London
Tower Hamlets) analysis published come into force Review published Green Paper Plan published
MAY JUNE JULY NOVEMBER due late 2018 Winter 2019/20
2018 2018 2018 2018 2018 2018
7be disproportionately affected by labour Nationwide, housebuilding looks set
KNIGHT FRANK
availability because more than half of the increase, particularly on the outskirts of INTELLIGENCE
capital’s construction site workforce London and across the Midlands, For the latest news, views and analysis
on the world of prime property, visit
KnightFrank.com/blog
is from overseas. underpinned by more evenly distributed
house price growth and high levels of
In addition, many respondents suggested employment in regional cities. However, as
uncertainty over government. Developers identified in the survey, the market is not
in central London identified uncertainty in without its challenges, and continued policy FOR RESEARCH ENQUIRIES
Westminster and currency fluctuations uncertainty has the potential to weigh on Patrick Gower
affecting investor appetite. output in the coming years. Associate
+44 20 3640 7015
patrick.gower@knightfrank.com
FIGURE 14
Gráinne Gilmore
Regions identified by respondents as offering the greatest opportunities for their Head of UK Residential Research
businesses during the next three years. +44 20 7861 5102
grainne.gilmore@knightfrank.com
FOR DEVELOPMENT ENQUIRIES
SCOTLAND Justin Gaze
Head of Residential Development Land
GREATEST OPPORTUNITY +44 20 7861 5407
justin.gaze@knightfrank.com
David Fenton
Partner, Office Head
+44 1789 206964
david.fenton@knightfrank.com
NORTH EAST
With thanks to Hayfield Homes for
YORKSHIRE & the front page image, showing
THE HUMBER Hayfield Chase, Stratford-Upon-Avon.
Thanks to the survey respondents
for their time.
NORTH WEST EAST
MIDLANDS
WEST
MIDLANDS EAST
Knight Frank Research provides strategic
LONDON
advice, consultancy services and forecasting
(ZONES 1-2)
to a wide range of clients worldwide including
(ZONES 3-6) developers, investors, funding organisations,
WALES
corporate institutions and the public sector.
All our clients recognise the need for expert
independent advice customised to their
SOUTH WEST SOUTH EAST specific needs.
RECENT MARKET-LEADING RESEARCH PUBLICATIONS Important Notice
© Knight Frank LLP 2018 – This report is published
RESIDENTIAL RESEARCH
RESIDENTIAL DEVELOPMENT RESIDENTIAL RESEARCH
RESIDENTIAL RESEARCH
UK RESIDENTIAL for general information only and not to be relied upon in
LAND INDEX MARKET FORECAST
any way. Although high standards have been used in
ENGLISH GREENFIELD LAND
PRICES EDGE UP IN Q1 2018 LONDON The global perspective on prime property and investment
Headlines May 2018
UK house price growth has slowed
UK HOUSE PRICE FORECAST
the preparation of the information, analysis, views and
DEVELOPMENT
from a peak reached three years ago, There are five main factors at play in the sales seeing stronger growth and activity levels than
The value of English greenfield land climbed 0.9% between January and
although the annual rate of change market at present. the traditional property powerhouses of
March, while land values in prime central London remained unchanged. London and the South East, though large
remains in positive territory First, the balance between buyer demand
The average value of urban brownfield land rose 0.4%. discrepancies in capital values remain.
and the supply of homes being put up for
HOTSPOTS projections presented in this report, no responsibility or
sale, which differs across the country. The market’s political and economic mood
Key Facts Q1 2018 Average greenfield land values in England
climbed 0.9% during Q1 2018, aided by
Those fundamentals that underpinned
demand in Q4 remain unchanged.
Price growth across the UK is expected
to be 1% in 2018, and 14.2% Certainly, the disconnect in some UK towns and music is a duet of Brexit and future interest
cities between rising demand – on the back of rate rises.
English greenfield land values climbed demand for oven-ready sites with access However, high build costs are increasingly cumulatively between 2018 and 2022
to infrastructure. This took the annual limiting what developers are willing to pay stronger economic growth – and muted stock Brexit will continue to create uncertainty in the
0.9% during Q1 2018, taking the
change to 2.2%, down from 2.6% in the for land. levels, is contributing to price growth. short-term. And while interest rate rises will
annual change to 2.2%
RESIDENTIAL DEVELOPMENT
year to Q4 2017. In London, price growth over the next push up mortgage rates, the rates payable on
liability whatsoever can be accepted by Knight Frank LLP
Development land prices in prime central Secondly, stamp duty remains a curb on
five years is expected to be around home loans will remain near historic lows in
Uncertainty over the future of Britain’s London remained unchanged during Q1 transactions. However, in prime central
Urban brownfield land values rose
0.4%, taking the annual change
relationship with the European Union is
likely to weigh on future growth in values,
2018, taking the annual change to -2.1%. OPPORTUNITY AREAS 2018 13%, although prices are forecast to
dip this year
London, some parts of the market are moving
the short to medium-term.
into positive price growth for the first time in Finally, and perhaps one of the biggest factors
to 6.4% with house builders taking an increasingly Though trading volumes remain lower than
nearly two years. The trend is becoming in the market at present are the growing
selective approach when bidding for land as in previous years, a number of large sites
have been put on the market following UK rental growth is expected to be particularly apparent in areas where lower affordability pressures in some parts of the
they adjust to perceived risk in the market. country – these will weigh on pricing.
14% between 2018 and 2022 prices more fully reflect higher stamp duty
for any loss or damage resultant from any use of, reliance
Land values in prime central London the Christmas lull, which should provide
THE WEALTH REPORT 2018
remained unchanged, taking the The Help to Buy Equity Loan scheme a strong indication of the strength of the charges. In the lettings market, rental growth has been
has continued to contribute to sales rates, market, and whether larger developers are
annual decline to 2.1% On a more regional basis, the North/South slowing for a year. However, as with the sales
though developers are now embarking re-committing to Zones 1&2. divide in price growth has narrowed, with market, rental performance is dependent on
on projects due to complete after 2021
The GLA Affordable Housing policy – the Midlands, East of England and North West the type of property, as well as its location.
– when the scheme is currently stated to
end. Uncertainty over the future of the allowing developers to fast-track through
2018-2022 Forecasts, May 2018
on or reference to the contents of this document. As a
policy is likely to be reflected in English the process if they hit a threshold of 35%
greenfield land values in the coming Affordable Housing, or 50% on public
quarters, coupled with house builders land – is being digested by the market 2018 2019 2020 2021 2022 2018 - 2022
factoring into their margins the unclear and the jury is out as to whether this will Mainstream residential sales markets
economic picture ahead. provide a much need boost to Affordable UK 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%
Housing in the capital. The spread of prices London -0.5% 2.5% 3.0% 3.5% 4.0% 13.1%
Growth in urban brownfield land values paid for land sold with planning, compared
North East 2.0% 2.0% 4.0% 3.0% 3.0% 14.8%
general report, this material does not necessarily represent
moderated during the quarter, climbing to land sold without, has widened as
0.4%. This follows a strong final quarter of developers weigh up risk in a new planning
North West 1.0% 2.0% 4.0% 4.0% 4.5% 16.4%
2017, when values rose 4.9%, amid positive Yorks & Humber 1.0% 2.0% 3.0% 3.0% 3.0% 12.6%
environment.
sentiment and robust employment growth East Midlands 2.0% 2.5% 2.5% 3.0% 3.5% 14.2%
in the UK’s major cities – particularly in We anticipate prime central London Computer generated image for indicative purposes only West Midlands 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%
Birmingham. Values have climbed 6.4% development land values will remain stable
during the past twelve months. moving forward. One Barangaroo, Sydney Methodology Statement: East 2.0% 3.0% 3.0% 4.0% 3.0% 15.9%
the view of Knight Frank LLP in relation to particular
House price forecasts are based upon time series South East 0.0% 2.0% 3.0% 4.0% 4.5% 14.2%
regression analysis of relevant statistically significant
macro-economic variables adjusted in-house to South West 1.0% 2.0% 2.5% 3.5% 4.5% 14.2%
FIGURE 1 FIGURE 2 encompass externalities such as likely risk factors.
Wales 1.5% 1.5% 2.5% 3.0% 4.0% 13.1%
KNIGHT FRANK GLOBAL WEALTH ADVISORY
Residential development land prices Annual change in average land values The forecast uses the Nationwide House Price Index
as a base. Our forecasts assume a Brexit deal, but Scotland 1.0% 1.0% 2.5% 3.5% 3.5% 12.0%
Rebased 100 = Jun 2011 (Urban Brownfield = Dec 2014)
with a two year transitional period. Rental forecasts
based on ONS IHPRP.
Prime Central London Urban Brownfield Prime residential sales markets
Prime Central London Urban Brownfield
English Greenfield
properties or projects. Reproduction of this report in whole
150
English Greenfield
15.0% Helping you navigate the world’s prime property markets Prime central London East 0.5% 1.5% 2.5% 3.0% 5.0% 13.1%
12.5% Prime central London West 0.5% 1.5% 3.5% 3.0% 3.5% 12.6%
140 10.0% Prime outer London 0.0% 1.0% 3.0% 3.5% 4.5% 12.5%
7.5% Knight Frank’s Global Wealth Advisory team leverages market-leading research Prime England & Wales 1.5% 2.0% 2.0% 2.0% 2.0% 9.9%
130 5.0% “The political and economic
and best-in-class advice to provide exceptional service to our global private clients
2.5% mood music of the residential Residential rental markets
Index
120 market is a duet of Brexit and UK 2.5% 2.5% 2.5% 3.0% 3.0% 14.0%
or in part is not allowed without prior written approval of
0.0%
-2.5%
future montary tightening”. London 1.5% 2.0% 2.5% 3.0% 3.5% 13.0%
PATRICK GOWER 110 -5.0% Connecting people & property, perfectly. Prime central London* 0.5% 1.5% 2.5% 3.0% 3.0% 11.0%
Associate, Residential Research -7.5%
100
-10.0%
Prime outer London* -1.0% 1.0% 2.0% 2.5% 3.0% 8.0%
Follow Patrick at @patrickgower
90
-12.5% 2018 For the latest news, views and analysis
on the world of prime property, visit Source: Knight Frank Research
Jul-16
Jan-17
Apr-17
Jan-16
Oct-16
Jul-17
Apr-16
Oct-17
Jan-18
12th Edition NB. Price forecasts are for existing homes. Property values in the new-build market may perform differently.
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
For the latest news, views and analysis our blog or @kfintelligence
Knight Frank LLP to the form and content within which it
on the world of prime property, visit our knightfrank.com *Based on Knight Frank indices and boundaries, existing homes only.
blog or follow @KFIntelligence Source: Knight Frank Research Source: Knight Frank Research
AREAS TO WATCH PRICE FORECASTS MARKET UPDATE
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