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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



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%


Help to Buy: 96%


Source: Countrywide PLC 2014

100%

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70%

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Higher housing costs means new buyers must be more flexible

Distance moved



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

[email protected]

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,

detailed appraisal and comprehensive due diligence of a new development site, these

reports will enable developers to be confident in their assessment at every stage.

Each report delivers specialist analysis driven from access to industry sources such as

Market View, Land Registry, Glenigan and Experian, as well as the exclusive use of data

from Countrywide Surveying Services, whose reach covers one third of the UK market.

To request a sample, please email [email protected]


David Fell

Group Research Analyst

Countrywide Group

Kami Nagi

Business Development Analyst

Countrywide Land & New Homes

The Countrywide Research Team

development, demand and supply – 2014 - countrywide€¦ · new build development, demand and...

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