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New Build Development, Demand and Supply – 2014
DEMAND, DEVELOPMENT AND DELIVERY IN 2014 DEMAND, DEVELOPMENT AND DELIVERY IN 2014
www.countrywide.co.uk
It’s the fact that we can draw on such a breadth of
data that I am particularly proud to present our
first New Build Research, providing developers,
housebuilders and anyone involved within the new
build industry a snapshot of the market as it stands.
We are all only too aware of the challenges that
come with applying for planning permission and
the effects of this process on the viability of a new
site. In a marketplace where demand far outstrips
supply, differing local approaches to the planning
system can often cause housebuilders major
headaches. So it is our hope that the findings of
this research will help facilitate a more consistent
approach where possible in order to get the UK
building at the rate that is needed, recognising
local factors that will naturally influence a decision
and the need for sustainable development. Our
Market Research Reports, launched this summer,
also provide housebuilders with detailed analysis
of a new site from multiple data sources, helping
them to further assess a new site’s potential before
submitting a planning application. Please find more
information on these reports on the back cover of
this document.
No New Build Research would be complete without
considering the effects of Help to Buy. The scheme
has undoubtedly enhanced the ability of buyers
using the scheme to purchase, most notably
outside the London and the South East. A degree
of compromise has always been required when
purchasing for the first time and, as this research
shows, buyers using the scheme aren’t immune
from the pressures of the housing market either.
However, we can now see the positive effects of
Help to Buy at a local level with more home buyers
being able to purchase within their immediate area.
This research ends by focusing on Stratford, the
location of a significant amount of new development
in the run up to the 2012 Olympic Games in London.
We focus on the legacy left behind and look at how
certainty created by the planning system meant
the Games and associated developments were
ready in time for 2012. Looking forward, the key
will be whether some of the lessons learnt can be
appropriately adopted
without the need for an
Olympic Games to be held
in every area of the UK in
need of regeneration.
1 2
IntroductionAs the UK’s largest integrated property services group, our ability to provide insight around the health of the market using data from both inside and outside our business is truly market leading.
Attitudes to Development by Local Authority
Countrywide plc, the UK’s largest integrated
property services Group, including the largest
estate agency and lettings network, operates
more than 1,300 associated branches across the
UK. Countrywide plc’s network of expertise helps
more people move than any other business in
the UK and is a leading provider of estate agency,
lettings, mortgage services, land and new homes,
auctions, surveying, conveyancing, corporate
property management services and commercial
property. Countrywide plc’s award-winning
service has earned the business over 180 high-
profile industry awards in the last six years, with
customers voting Countrywide Best Large Chain
National category, at the 2013 ESTA awards. Our
Land & New Homes team was named the UK’s
Best New Homes Agent for two consecutive years
at the Estate Agency of the Year Awards 2012
and 2013 and Countrywide Surveying Services
won the award for Best Anti-Fraud Measure at
the Mortgage Finance Gazette Awards 2013
and 2014.
“We can now see the positive effects of (Help to Buy)... with more home buyers able topurchase within their immediate area.
”About Countrywide plc:
James Poynor
Managing Director
Countrywide Land
& New Homes
70%The proportion of major
residential planning
applications decided
within the statutory 13
week period, unchanged
since 2007.
87%The proportion of major
planning applications
(10+ residential units,
or sites in excess of
0.5 hectares) approved
in England.
Pro Residential Growth
Slow Residential Growth
Each planning authority is scored against three criteria:
1. Proportion of major residential planning applications (10+ dwellings) approved
2. Proportion of major residential planning applications decided within the 13 week deadline
3. Completion of new homes in 2013/14 as a proportion of 2000-2014 average
Planning departments in
large urban areas tend
to be the most receptive
to new development.
Middlesbrough, Coventry
and Gateshead all perform
particularly strongly. 85%
of all major residential
planning applications are
decided within the 13 week
deadline with 93% of
applications approved.
Small, more affluent,
rural local authorities are
significantly less likely to
facilitate new development.
Less than half of all major
planning applications
are decided inside the
statutory 13 week period in
Wokingham, Cheshire East,
Tewkesbury, Mid Devon
and Amber Vale. Average
approval rates are 15%
below the national average.
Pro Residential Growth
Slow Residential Growth
East and South East London
Ring surrounding greenbelt
South Yorkshire
Newcastle
London greenbelt
Cheshire East
Greater Manchester
Cotswolds
Birmingham
Source: DCLG 2014
DEMAND, DEVELOPMENT AND DELIVERY IN 2014 DEMAND, DEVELOPMENT AND DELIVERY IN 2014
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Major residential decisions
2013/14
Percentage of major
applications approved
Percentage of major
applications decided within
13 weeks*
2013/14 completions as
proportion of 2000 -2014
average
Southwark 35 94% 86% 139%
Redcar & Cleveland 15 100% 67% 131%
Havant 19 100% 68% 113%
Telford and Wrekin 38 97% 74% 158%
Middlesbrough 16 94% 75% 102%
Plymouth 42 90% 88% 100%
Newham 10 90% 90% 93%
South Hams 14 86% 93% 121%
Coventry 38 95% 100% 62%
Gateshead 29 90% 90% 61%
3 4
Help to BuildAt its best the planning system works to quickly deliver new development where it is needed, balancing the needs of local people with those of economic development and the environment.
From the housebuilder’s perspective, planning can frequently be
a slow, expensive and bureaucratic process. Major residential
planning applications, that is every application for 10 or more new
homes (or sites of more than 0.5 hectares where the number of
units isn’t known), represent the way in which over 95% of all new
homes gain permission. Almost all are determined by local planning
authorities, with their approach to decision making having a direct
bearing on the number and time frame in which new homes are
delivered. Countrywide has analysed the performance of the planning
departments in each of England’s 326 local authorities to build up
a picture of how responsive the planning system is to the needs of
developers bringing forward major residential developments. Each
planning authority has been assessed on how quickly it makes
decisions, the outcome and the number of homes delivered in the
2013/14 financial year as a proportion of the 2000-2014 average.
Failure to Plan is a Plan to Fail
The pro residential growth planning departments tend to be found in
and around large cities, predominantly outside London. While large
cities are generally responsive to those delivering new homes, less
prosperous local authorities, often on the fringes of larger urban
areas, are even more so. Most have significant experience of dealing
with major planning applications, riding on the coattails of nearby
large conurbations. The large number of regeneration schemes and
new housing development means these authorities have built up
considerable expertise managing and promoting new development.
Weaker economic fundamentals makes authorities keen to attract new
development in order to drive regeneration and job creation.
At the other end of the spectrum, a number of planning departments,
predominantly in more expensive areas, have proved significantly
less able to provide new housing schemes. Decisions tend to be
made slowly, in many cases the majority haven been made outside
the 13 week deadline¹. While negotiations between a builder and
local authority can be time consuming, the costs incurred can
make development unviable, particularly for smaller developers.
The financial cost of a rejected application is huge with the cost
of submitting an application far in excess of the fees paid to the
local authority. Government data puts the cost of preparing a major
residential planning application (excluding planning fees) at an average
of £25,000².
The variation in the rates of approvals is not only a reflection of the
quality and appropriateness of proposals, but also of the availability
and cost of pre-application advice. Research by Countrywide shows
that between 2012 and 2014, 95% of the local authorities which didn’t
already charge for pre-application advice brought in charges. While
some larger developers working on bigger sites do pay for a dedicated
planning officer, for smaller developers these costs tend to be
prohibitive. With budgets under pressure, local authorities can impose
charges to cover their costs, although charges vary significantly. A
single meeting with planners at the pre application stage to formally
discuss a 50 unit scheme, followed by written advice, costs £350 in
Christchurch but £3,000+ in Wokingham. With resources stretched,
the days of picking up the phone to a planner, generally the easiest
way of achieving the best outcomes, appear to be fading.
Positive Delivery of New HomesSource: DCLG 2014
Far from fuelling already buoyant markets in
London and the South East, Help to Buy has
created viable demand for housebuilders in
markets in the Midlands and the North making
new development possible. With 84% of all Help to
Buy Equity Loan lending in the UK outside London
and the South East, evidence suggests that this is
supporting new housebuilding in these areas.
While the scheme is not limited to first time buyers,
take up by this group has been particularly strong
with 85% of those using the Equity Loan scheme
buying for the first time. Of these, 60% come from
the private rented sector with the other 40% living
at home. For first time buyers looking to make the
jump into homeownership, the scheme is very
competitive. For every £1 spent on repayments by
someone with a 95% LTV mortgage, a buyer using
the Equity Loan scheme spends just 73p.
This heightened accessibility to homeownership
has allowed more first time buyers to stay closer to
where they were living previously, by purchasing
new build property. The average Help to Buy
backed purchaser moves 1.8 miles, compared to
2.4 miles for the average first time buyer. Improved
affordability means these buyers tend to be from
surrounding areas, with fewer new buyers forced to
look further afield. The fact that half of those using
the scheme choose or are able to buy in the same
town, highlights how access to affordable housing is
instrumental in retaining young local people locally.
While Help to Buy is attracting local people, buyers
using the Help to Buy scheme are not immune
from the difficulties faced by first time buyers more
generally. Distinct regional variations exist. In the
north of the UK, households tend to move shorter
distances, an average of 1.6 miles, staying nearer
to areas where they were previously renting. The
cost of homeownership is generally closer to that
of renting, meaning affordability constraints are a
smaller issue when moving between the two sectors.
Further south, and particularly in London, the
higher cost of housing means new buyers must be
more flexible. Higher house prices mean it is often
unaffordable to buy in areas where many presently
rent. In London just 40% of first time buyers stay
within the same local authority and move nearly
twice as far as their northern counterparts - an
average of 3 miles. Infrastructure and affordability,
rather than town or increasingly arbitrary local
authority boundaries, govern where new buyers
choose and are able to buy.
However, Help to Buy is not a magic bullet for the
difficulties faced by first time buyers. Buying a
home for the first time has never been easy, and
Help to Buy on its own can do little to change this.
Given its high profile nature, what Help to Buy has
done effectively is to put the challenges facing
first time buyers into the spotlight. Due in no small
part to Help to Buy, housing and house building in
particular, look set to feature prominently in next
year’s general election.
Help to Buy
¹ https://www.gov.uk/government/statistical-data-sets/live-tables-on-planning-application-statistics
² https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/8353/2169897.pdf
Government data shows the takeup of the Help to Buy scheme has been strongest in the markets which need it most.
Where do Help to Buy backed purchasers come from? Source: Countrywide PLC 2014
* including approvals and refusals
Where do buyers using Help to Buy purchase?
Same town
Same local authority
Same region
Help to Buy: 50%
All first time buyers: 37%
Help to Buy: 71%
All first time buyers: 62%
Help to Buy: 96%
All first time buyers: 92%
Source: Countrywide PLC 2014
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
Lond
on
% from same local authority
Mile
s
% b
uyin
g in
sam
e lo
cal a
utho
rity
East
Sout
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st
East
Midl
ands
Sout
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est
Scot
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North
Wes
t
Wes
t Midl
ands
Wale
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York
shire
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umbe
r
North
Eas
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Higher housing costs means new buyers must be more flexible
Distance moved
DEMAND, DEVELOPMENT AND DELIVERY IN 2014 DEMAND, DEVELOPMENT AND DELIVERY IN 2014
www.countrywide.co.uk
At the gateway to London’s outer East End, Stratford was brought
onto the international stage as the host of the London Olympics
in 2012. The choice of Stratford stemmed from its industrial past, and
subsequent decline. The availability of contaminated brownfield land
on which to build meant there was potential to leave a lasting legacy
after the athletes had gone home.
To understand why Stratford was chosen, it’s necessary to take a
look at the past. The railway yards and docks to the south made
Stratford a centre of national and international trade during the early
1900s. Manufacturing and other industries, such as chemical plants
and printers, relocated over the border to Stratford, at the time
in Essex, which had been prohibited in London at the time. Their
decline and eventual closure during the 1980s and early 1990s
meant a significant number of large land parcels were available,
although they were owned by some 300 different businesses. The
ability to successfully bring this land forward for development quickly
underpinned the success of the bid.
Charged with ensuring there was a legacy to realise were Newham
Council, the Olympic Delivery Authority and the London Legacy
Development Corporation (LLDC) which was set up to oversee the
continued development of the Olympic Park and surrounding areas.
It has jurisdiction over parts of four Olympic Boroughs: Hackney,
Newham, Tower Hamlets and Waltham Forest. All planning applications,
big or small, go to the LLDC rather than the local authority. A Boost for Builders
Like many of the more affordable areas of London, house prices in
Stratford have increased. Average prices grew 21% between 2012
and 2014, compared to 27% in London as a whole. In Stratford much
of this increase has been driven by high quality new development,
with house builders now delivering a product of far higher quality
than existed in Stratford in the past. In this respect the Olympics
proved to be a game changer for Stratford. Up until 2008, new build
developments in Stratford offered a product similar to what was
widely available. They tended to be high density and as close as
possible to existing transport links with developers keen to minimise
risk. The price differential between the new build and the second
hand market was minimal. After 2008, and three years after London
secured the Olympic Games, this began to change. This change didn’t
happen overnight - the three year period broadly represents the time
taken for a developer to secure a site, obtain planning permission
and start construction. By 2008 developers were offering a product
superior to the rest of the Stratford market and able to command a
premium of between 15%- 20%. As the brownfield Olympic site was
developed, improvements to the public realm driven by the Olympics
meant Stratford began to get a better press and establish itself as an
attractive, yet affordable, location.
5 6
Stratford RisingThe way in which infrastructure was delivered in time for the 2012 London Olympics can teach us some valuable lessons.
The Stratford ‘halo’ - Average household income Source: GLA 2014
As a result, developers have begun construction
on increasingly high specification developments in
locations further from transport links as Stratford
grew as a destination in its own right. By 2012, new
build units were selling for a premium of 33% above
the Stratford average, an indication of a higher
quality product being offered in an increasingly
established location. The confirmation of Crossrail
in 2009 and the Mayor’s intention to fund a move
from (TFL travel) zone three to two seems set to
further heighten Stratford’s appeal to Londoners
working outside East London. Newham Council’s
plan to build a further 28,000 new homes in the
area, three times the number built in Newham
since 1992, will drive the further development
of Stratford’s retail offer above and beyond the
Westfield development. Growing developer
confidence in Stratford has resulted in the delivery
of large numbers of new homes – the majority of
which would otherwise not have been built.
It can be easy to forget that regeneration driven
directly by the Olympics has taken place in only a
relatively small part of Stratford. Indeed, E20 a new
postcode created to accommodate the Olympic
Park and Athlete’s Village, saw the vast majority
of it. The Olympics acted as a catalyst for further
development in Stratford, however, serving to
boost house builder confidence meaning more
new homes have been built. Private rented, shared
ownership and Help to Buy backed schemes have
played a role in balancing affordability with viability.
London can quite rightly claim to have successfully
avoided the legacy left by the 2004 Olympics in
Greece where much of the Olympic site now lies
derelict. This was made possible by the certainty
created by the planning system. The Olympic
Delivery Authority (ODA) was set up as a single
owner, developer and planning authority with
the task of ensuring risk was removed as far as
possible from London’s staging of the games.
London was the first city to host the Olympics
where all necessary planning permissions were
in place prior to the bid being selected. The
de-risking of the Olympics, both in terms of
ensuring the venues were ready on time and in
ensuring the site was viable once the athletes had
gone home, presents some important lessons
for the planning system more generally. Certainty
allowed developers responsible for delivering the
site to plan years in advance what could be built
and where. Likewise, the ODAs role in assembling
what were small complex packages of land meant
that an area which was essentially undevelopable
brownfield land, was brought forward, in planning
terms at least, extremely quickly. The challenge
for the planning system is to consistently deliver
Olympic scale developments, particularly on
difficult brownfield sites, without the need to hold
an Olympic Games.
“The challengefor the planning system is to consistently deliverOlympic scale developments... without the need to holdan Olympic Games.
”
New build sales (E15) as aproportion of total transactions
Average new build price (E15)compared to average price
Source: Land Registry 2014
Source: Land Registry 2014
New residential development in Stratford began in earnest
in 2008, at a time when many developers elsewhere began
mothballing schemes.
Securing the Olympics in 2005 grew developer’s confidence
in the area. House builders felt able to deliver increasingly
high specification homes.
Stratford
Newham
Tower Hamlets
Canary Wharf
£350,000
£300,000
£250,000
£200,000
£150,000
£100,000
£50,000
£0
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Average new build price
Time taken to bring to market
Average price
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
201
0
2011
20
12
20
13
20
14
Reduction in availability of brownfield sites and growing number of homes destined for the private rented sector
£56,000 to £175,000
£46,000 to £56,000
£39,000 to £46,000
£35,000 to £39,000
£20,000 to £35,000
For more information please contact:
Corporate Client Enquiries
0207 908 1562
www.countrywide.co.uk/insight
Countrywide Land & New Homes
Countrywide House
88-103 Caldecotte Lake Drive
Milton Keynes
MK7 8JT
Tel: 01908 961109
Email: [email protected]
About Countrywide Market Research Reports
Countrywide Land & New Homes offers three tiers of Market Research Reports each
designed to assist with the different stages of a site evaluation. From the initial pricing,
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To request a sample, please email [email protected]
www.countrywide.co.uk
David Fell
Group Research Analyst
Countrywide Group
Kami Nagi
Business Development Analyst
Countrywide Land & New Homes
The Countrywide Research Team