Housing market recovery spreads

Confidence has returned to property markets beyond London, supported by the economic recovery and government measures to stimulate demand and instigate further housebuilding.

Property prices in England and Wales grew by 5.3% in the year to February 2014 according to the Land Registry. Although London continues to lead the charge, with values up 13.8% over the same period, price growth is spreading as buyers take advantage of the wide price gap between the capital and the rest of the country.

The flow of wealth has contributed to strong price rises in Windsor and Maidenhead (6.4%), Reading (6%) and Surrey (6.2%). Beyond London’s commuter belt, the southern cities such as Brighton and Hove (5.9%), Bath and NE Somerset (4.4%) and City of Bristol (6.5%) have outperformed their rural counterparts since the credit crunch, as buyers seek higher end homes in more 
urban locations.

Even stronger growth was recorded in Oldham, greater Manchester, where prices grew by 8.8%. However, this comes from a low base as values still remain -24.9% below their 2007 peak despite recent growth.

Overall average values across England & Wales remain 7.1% lower (Feb 14) than they were at 2007-08 peak values. London, where average prices now stand 17.1% higher than the previous peak, is still the only region that has recovered all of its earlier falls, although the South East is now catching up.

New Home Premiums

The ongoing undersupply of homes for sale in stronger markets, particularly in the south, is contributing to price increases and boosting demand for new build properties. Sales of new homes now account for one in ten transactions but values can differ significantly from second hand stock.

Homebuilders have been reporting increases in new home prices for the past 14 months, according to a survey by Home Builders Federation (HBF). This growth reflects price rises in the wider market as well as the effect of the Help to Buy equity loan scheme. It also explains why the industry is cutting back on the use of sales incentives.

Our analysis of Savills own sales records shows new build price premiums, where they exist, are by no means uniform. There are many factors driving these numbers, not least the building specification of the new homes being sold compared with the existing stock in the area.

In general, our figures suggest that niche developments in strong markets can achieve premiums over both the average second hand sales values at local Savills offices and the top values in the general local second hand market.

This effect is observed most clearly in the Winchester and Canford Cliffs offices, where median sales values for new build have outperformed comparable second hand stock. Research into buyer demographics reveals that a high number of older buyers links these two locations.

Downsizer demand


Developers targeting this demographic in higher value areas are set to benefit. Our survey of Savills applicants for prime regional property shows that the over 60s are the age group most likely to consider purchasing a new property. We’ve also calculated that the over 65s own nearly £1 trillion of equity in residential property. This suggests that significant demand for new build homes, particularly at the higher value end of the market, is likely to come from those looking to downsize and release equity.

Off-plan sales are up

A snapshot of the London market in March 2014 shows that less than 5% of available new build units were complete, but across the country a similar analysis gives a wide range of results. In strong markets such as Oxford and Bristol the levels of built stock are also very low, with less than a quarter of the available properties complete. There is a higher number of built stock outside these hotspots.

Taken from
Spotlight: What's Next for Residential Development?