LSL New Build Index The market indicator for New Builds March 2018 In the year to end February 2018 new build house prices rose on average by 9.7% across the UK which is up on last year s figure of 5.3% Political events The Government s aim is to deliver 300,000 homes per year by the mid 2020 s, up from last year s figure of 217,000. They are now undertaking an overhaul of the National Planning Policy Framework to encourage the parties involved to speed up the delivery of new homes. Developers will be more accountable for delivering infrastructure and affordable housing, and Local Authorities will be made accountable for houses delivered rather than numbers planned for. Councils will get more freedom to build on brownfield land and to extend upwards, and a clearer system to analyse housing need and define developer contributions is promised. The spring statement included an update on the investment programme of at least 44 billion over the next five years that was promised in the Autumn 2017 budget. Financial support to small house builders via the Housing Growth Partnership is to be doubled to 220 million. London is to receive 1.67 billion to build another 27,000 affordable homes by the end of 2021-22. The Government is working with 44 areas on their bids into the 4.1 billion Housing Infrastructure Fund. The market We have looked at the most recent annual house price change data from three leading indices: Nationwide, HM Land Registry / ONS and LSL Acadata. The results are shown in the table below where HM Land Registry / ONS data is used to show the average house price at regional level from the 2007 peak and the latest average price. The next column shows the percentage change from this peak to present and the final column shows the average house price change over the past year as derived from the above mentioned indices.
House Price Growth in 2007/2008 2007 TO 2008 PEAK LATEST AVERAGE PRICE % CHANGE FROM PEAK % CHANGE AVERAGE North East 139,000 131,000-5.8 1.2 North West 152,000 158,000 3.9 4.6 Yorkshire and The Humber 150,000 157,000 4.7 2.1 East Midlands 158,000 186,000 17.7 4.5 West Midlands 165,000 191,000 15.8 4.4 East 210,000 290,000 38.1 3 London 299,000 484,000 61.9 0.1 South East 239,000 322,000 34.7 2.3 South West 212,000 254,000 19.8 5.5 Whilst there are some quite significant differences between the reported price rises for each region, the picture is clearly one of a wave that has now spread out to the regions from London. But that said, prices in London are now over 60% higher than the level they were at in 2007 which is more than fifteen times the growth seen in the Northern regions. The main growth has now moved away from the regions that have seen most growth to date. Current news In a BBC article there were mixed views on whether or not we need 300,000 new homes per year. Demand is not so much population growth as a growth in smaller households arising from divorces and people living longer. There is a mismatch between the housing stock and the housing required. The report says that according to current projections the number of households is set to increase by 210,000 each year between 2014 and 2039 in England. The survey found that 59% of private renters (or 2.6 million households) stated that they expected to buy a property at some point in the future. Last month saw the publication of a report by the Institute of Fiscal Studies which focused on home ownership. It brought into sharp focus the reduction of home ownership for some younger people. In 1995/6 nearly two thirds (65%) of 25-34 year olds with income in the middle 20% for their age, owned their own home. By 2015/6 only one quarter (27%) owned their own home. The latest English Household Survey which was released in November 2017 contains some interesting facts that go some way to explain the present housing market issues. Under occupation in the owner occupied sector increased between 1995/6 and 2015/16 from 39% to 52% (7.4 million households). But in the rented sector the rates of under occupation fell. Of course in a market that was operating well the owner occupiers would be downsizing so making the use of household space more efficient. The long view 423,544 is the number of residential units that have planning permission which is yet to be implemented according to analysis by the Local Government Association. The accusation levelled at developers is that they are land banking or holding onto the land whilst the value goes up.
The implication is that the failure of the younger generation to get on the housing ladder is in part down to the developers. Whilst this represents easy political capital as typified by Teresa May saying young are right to be angry about the lack of homes, there are some holes in the argument. House building output has been growing in recent years but the total volume of all house sales is relatively fixed and house builders have to operate within the wider housing market. The market can only consume a certain amount of new build each year. New build sites come in relatively large blocks of property in set locations whilst the demand for extra housing is widespread across all areas. It isn t so easy to increase supply when demand is fixed, so there would probably be a local demand and supply mismatch. Too much supply pushes prices down which would make sites unviable. And of course houses have to be built, mostly by large well established companies. Those companies rely on labour and materials, both of which are in short supply. And add to this the process that must be gone through to go from a site with planning permission and many conditions to a finished estate of houses. All of these factors limit the ability to increase supply, certainly at any sort of pace. Finally the Government s view seems to be very London centric. In some regions prices are not much higher than they were in at the 2007 to 2008 peak. And in Greater London house prices are at best stagnant and possibly falling, added to which is the considerable uncertainty that Brexit brings, particularly to the service sector based Southern regions. These aren t market conditions that would encourage companies to hold on to land in the expectation of rising prices, so again they don t support the claim of land banking. First Time Buyers - Affordability. 2 BED 70 SQ.M STARTER HOME AVE ANNUAL EARNINGS FULL TIME EMPLOYEES HPE AFFORDABILITY INDEX East Anglia 255,894 32,894 7.78 125 East Midlands 136,737 27,401 4.99 80 Greater London 493,958 39,155 12.62 203 North East 114,729 26,522 4.33 70 North West 142,424 28,573 4.98 80 Scotland 141,890 29,375 4.83 78 South East 255,343 34,588 7.38 119 South West 190,200 29,730 6.40 103 Wales 125,360 27,544 4.55 73 West Midlands 160,859 28,703 5.60 90 Yorkshire and the Humber 138,691 27,829 4.98 80 Average 6.22 100 This is based on a weighted calculation which reflects regional differences in sales volumes of flats and terraced property. Ave annual earnings from ONS EARN 05: Average Gross Earnings of Full Time Employees.
Average New Home Prices Period March 2017 to February 2018. Detached Flats Semis Terrace North/South Average % Change SCOTLAND NORTH % AVERAGE SOUTH % AVERAGE 277,433 3.54% 10.17% 149,154 10.90% 18.72% 197,419 8.91% 12.60% 203,749 7.07% 14.49% NORTH WEST NORTH EAST 339,150 300,263 157,757 132,276 203,830 185,480 211,240 170,470 WEST MIDLANDS YORKSHIRE & THE HUMBER 373,415 312,199 186,343 161,300 243,193 187,168 231,768 189,955 WALES 250,930 EAST MIDLANDS 327,806 167,232 166,637 188,226 199,274 167,984 205,490 SOUTH WEST GREATER LONDON SOUTH EAST EAST ANGLIA 378,103 855,774 536,311 466,721 221,430 497,845 270,655 284,793 258,647 618,489 374,537 335,644 268,946 621,346 362,492 330,115
Notes This Index has been prepared by e.surv using anonymised data based on a proportion of all new build valuations provided for lending purposes. Figures represent 12 month rolling averages for each period. The copyright and all other intellectual property rights in the Index belong to e.surv. Reproduction in whole or part is not permitted unless an acknowledgement to e.surv as the source is included. No modification is permitted without e.surv s prior written consent. Whilst care is taken in the compilation of the Index no representation or assurances are made as to its accuracy or completeness. e.surv reserves the right to vary the methodology and to edit or discontinue the Index in whole or in part at anytime. e.surv (www.esurv.co.uk) is the Valuation business of LSL Property Services plc (www.lslps.co.uk) and is the UK s largest residential valuation practice, acting for lenders, developers, Social Housing organisations and other stakeholders in the residential property market. The business employs circa 450 chartered surveyors and covers the entire UK. LSL Land & New Homes is a trading style for members of the LSL Property Services Group Estate Agency Division, one of the leading residential property services groups in the UK. It s strategy is to create partnerships with developers and builders to support their objectives and add value to their businesses. It can provide integrated solutions for their benefit drawing on the expertise of companies who are also under the LSL Group umbrella including valuation services (e.surv), rental portfolio services, asset management services and estate agency services fronted by well-known high street estate agency brands like Your Move and Reeds Rains. Services can be tailored to suite individual needs from bespoke site sales and marketing, agency referral to the disposal of part exchange, assisted schemes and new build stock, land sales and acquisitions. For further information or enquiries regarding the underlying data of the LSL New Build Index, please contact Shaun Peart via email Shaun.Peart@lslnewhomes.co.uk or by phoning 07789 948411. For further information about the LSL Property Services Group including LSL Land & New Homes and e.surv, visit www.lslps.co.uk Disclaimer: The data is provided by LSL Land & New Homes and is based on data provided as described above. While reasonable skill and care has been taken in the preparation of the data the copyright and all other intellectual property rights of which belong to e.surv limited - neither e.surv Limited nor LSL Land & New Homes can accept liability for the accuracy or completeness of the data provided. Reproduction in whole or part is not permitted unless an acknowledgment to e.surv Limited is included. No modification is permitted without e.surv Limited s prior written consent. No warranty of the figures is given and no responsibility or liability of any nature to you or any third party for the whole or any part of its content is accepted. It is assumed that you will carry out your own due diligence before proceeding with any proposals or making any financial commitments.