RESIDENTIAL PROPERTY FOCUS ISSUE 1 2015 - CONSTITUENCIES OF HOUSING VALUE WHAT IMPACT WILL THE VALUE OF UK HOUSING STOCK HAVE ON THE ELECTION?
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Savills World Research
UK Residential
Residential
Property Focus Inside
issue 1 2015 Five-year
house price
forecasts
Constituencies of housing value
What impact will the value of UK
housing stock have on the election?
£
Prime housing in an election year
Mainstream market: A fine balancing act
Affordability in the London housing market
savills.co.uk/research
This publication This document was published in February 2015. The data used in the charts and tables is the latest available at the time of going to press. Sources are included for all the charts. We have used a standard set of notes and abbreviations throughout the document. Glossary of terms n Mainstream: mainstream property refers to the bulk of the UK housing market with, for example, price movements monitored by reference to national and regional average values. n Prime: the prime market consists of the most desirable and aspirational property by reference to location, standards of accommodation, aesthetics and value. Typically it comprises properties in the top five per cent of the market by house price. Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 600 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.
February 2015
Five-year
forecasts
Foreword page 14
demographics & HOUSING:
A political game changer
The generational divide witnessed across the
Executive summary
housing market is a significant political issue
A
cross the developed As Lucian points out, it is difficult
world, capital is to maintain consistent housing
becoming concentrated policies when £2.4tn (61%) of all
in the hands of owner occupied housing stock is in What impact will the value of
older, home-owning Conservative constituencies while
households. Globally, the divide almost half (48%) of the value of social
UK housing stock and its distribution
between equity-rich boomers and housing is in parliamentary seats held have on the forthcoming election?
equity-poor millennials is significant by Labour. Policies designed for one See pages 04/05
and growing. area may have either no effect or
Post-war baby boomers have lived adverse effects in another.
in an era of high inflation and rising On top of this, different markets
incomes. This has favoured house are at different stages of recovery
purchase and rapid debt repayment. and growth. Sophie Chick shows that
Subsequent generations have while prime central London wanes The £1m+ residential sales market
experienced decreasing inflation and other prime markets are waxing.
has grabbed the attention of politicians
low interest rates. Meanwhile, high Market experiences will differ regionally
house prices have raised the hurdles and by sector, as our forecasts on in the run-up to the election
to home ownership. page 14 show. See pages 06/07
This diverging social and economic The problems of the current housing
experience has significant knock-on shortage, and its housing market
political effects and geo-demographic consequences, have been decades
consequences, so it will be setting in the making and will take far longer
political agendas in a wide variety of than a single parliamentary term to sort
countries, both now and into the future. out. The party political consequences
In the UK, the concentration of capital of getting it wrong go far beyond the
The gap in the mainstream market
among older generations is playing out malaise of a relatively small (in historic between the ‘haves-and-have-nots’
in the housing market as increasing terms) number of frustrated first time is an issue for any future government
numbers of people, particularly young buyers. On page 12 Susan Emmett
households without capital, swell the explores how parties have to unify See pages 08/09
ranks of market renting. on the basic housing issues if any real
The simple fact that a significant difference is to be made.
demographic is capital-poor and Wealth distribution, social justice,
different parts of the population cost of care, pensions and housing
have different experiences of, and benefit, the future of the construction
expectations of, the housing market, industry, the consumer economy
Affordability constraints look set to
has the potential to impact outcomes and the impact of all this on the limit house price growth in mainstream
of our general election – and beyond. health of the long-term economy London over the next five years
This phenomenon is explored in are big issues. They can all
this issue of the Focus. Lucian Cook increasingly be invoked as reasons
See pages 10/11
reveals how significant stores of to do something meaningful to put
personal wealth are now tied up in right past mistakes and to make
UK housing. An incredible 63% sure the UK housing market is fit for
(£3.6tn) of the UK’s £5.75tn housing purpose in the 21st century. n
value is held by individuals as housing
equity (net of borrowing). Where do the three main parties
This means that the taxation of Yolande Barnes stand on major housing issues
land and property, housing policy World Residential approaching the election?
and spending has a major impact 020 7409 8899
on how rich a significant proportion ybarnes@savills.com See pages 12/13
of the population feels. @Yolande_Barnes
savills.co.uk/research 03Residential Property Focus
Valuing Britain
constituencies
It will come as little surprise
that the total value of housing
stock in Conservative constituencies
of Housing VALUE
is somewhat higher than that in
Labour constituencies. In fact, it is
nearly double (at £3.3tn).
This may be primarily a result
of underlying and historic socio-
economic conditions which have in
turn determined the political colour
of the constituency.
H
There is still a strong argument that
What impact will the value of UK ousing has rapidly the maintenance of a consistent
risen up the UK housing policy is difficult when,
housing stock and its distribution political agenda in on the one hand, £2.4tn or 61%
have on the forthcoming election? the past five years of all owner occupied housing
and will undoubtedly value is located in Conservative
continue do so in the run up to the constituencies while on the other,
general election in May. almost half (48%) of the value of
In this article, we examine how social housing is in parliamentary
Words: Lucian Cook the state of housing markets may seats held by Labour.
Twitter: @LucianCook already be part of the political Both parties will have interests
landscape in the UK. Housing is a in the private rented sector, where
significant store of personal wealth; the amount and value of stock
our analysis shows that the total continues to rise because of a lack
value of UK housing stock currently of accessibility to both of the other
stands at £5.75tn – equivalent to the forms of tenure.
combined GDP of Germany, France Geography also has a part to play,
and Italy. It is a figure that has risen given the housing markets in the
“The total value of by £543bn in one year. south have already outperformed
UK housing stock Political impact
those further north and are likely
to continue to do so over the next
currently stands at It is the way in which this value and phase of the housing market cycle.
£5.75 trillion” housing growth is distributed that will
influence future housing policy and, Election implications
Lucian Cook, Savills Research ultimately, the fate of different parts In what is anticipated to be a close
of the UK housing market. election, all parties will need
to engage with stakeholders across
all sectors of the housing market.
FIGURE 1
£1.62tn of housing stock is located
The value of UK housing London and Private Rented Sector on the up in seats where the majority was less
than 10% of the vote at the last
election and the value profile in these
areas almost exactly replicates that
of the UK as a whole.
The pressure to have joined up
UK housing London housing Private rented sector housing policy towards housing
delivery is particularly evident in
Greater London, where the total
£5.75 trillion £1.485 trillion £1.16 trillion value of housing stock is split
total of UK housing, total value of stock in relatively evenly between the two
total value of housing stock
the private rented sector main parties. Here the value rose
in London
in the UK by 20% or £247bn in 2014 alone
and by £563bn in five years. The
A figure that has risen by A figure that has risen by A figure that has risen by resulting affordability pressures will
£543 billion £247 billion 57% undoubtedly come into focus over
the period of the next parliament
in one year in one year in five years
whoever holds the balance of power.
£563 billion Common need to deliver
£966 billion in five years 127% The growth of the private rented
in five years More than combined value of housing in ten years sector, the falling numbers in
stock in Scotland, N. Ireland & Wales
mortgaged owner occupation,
the restricted amount of new social
Source: Savills Research housing and the value gap between
04February 2015
the great divisions of housing value
Geo-demographic differences 5-year value changes 2009-2014
2014 Value £bn 1-year 5-year
£2bn £-6bn
London 1,485 20% 61% 1% -1%
South East 1,058 11% 25%
East 584 11% 22%
South West 519 7% 14%
East Midlands 295 5% 9%
West Midlands 360 5% 7%
Yorks & Humber 310 4% 1%
Scotland 325 7% 1% £0bn £47bn
Wales 184 2% 0% 0% 8%
North West 423 5% -1%
North East 133 4% -5%
Total 5,752 10% 20%
Value split by Party
1,250
■ Owner Occupied Unmortgaged
Value of Housing Stock in
1,000 ■ Owner Occupied Mortgaged
■ Private Rented Sector
Constituency £bn
■ Social Rented Sector
750
■ Other
£378bn £563bn
500
21% 61%
250
0
Conservative Labour Liberal Democrat Other
Source: Savills Research
Table 1
London and the rest of the country much more housing across the full
are certainly exercising policymakers range of tenures – particularly in the 5-year tenure change 2009-2014
across all parties. The aim must private rented sector.
Value
surely be to achieve a more co- Successful policies will improve the Tenure 1 year 5 year
£bn
ordinated, less-polarised and longer- efficiency of the use of existing stock,
term set of housing policies. expand supply of all types of housing Owner Occupied
There is cross party consensus that by avoiding excessive regulation 1,953 10% 20%
Unmortgaged
more housing needs to be delivered, and still recognise the important
even if there is the disagreement as to role of home ownership in providing Owner Occupied
1,972 7% 5%
why this is the case and what needs to households with financial security. n Mortgaged
be done to achieve it.
It seems inevitable policy positions Private Rented 1,159 17% 57%
61%
on housing will be defined by
the balance they seek to strike Social Rented 374 11% 20%
between stick and carrot, taxation
and incentivisation, regulation and Other 294 12% 29%
market-led solutions.
Of owner occupied
Hopefully the political rhetoric housing value located in Total 5,752 10% 20%
around these distinctions will not Conservative constituencies Source: Savills Research
cloud the underlying need to deliver
savills.co.uk/research 05Residential Property Focus
Prime market
Prime housing in
an election year
G
The £1m+ sales market has iven the level of markets in 2015. While the Labour
price growth in party seemingly presses on with
grabbed the attention of politicians London since 2009 its increasingly controversial
in the run-up to the election and the evolution proposal for a mansion tax, the
of prime urban Chancellor has further raised the
markets beyond the capital, the stamp duty liability at the top end of
number of £1m+ sales in 2014 is the market, while cutting the burden
expected to have been higher for the majority of the housing
Words: Sophie Chick than 2007 for the first time. market. Many have viewed this as an
Twitter: @SophieChick The increase in the size of this attempt to outflank the opposition.
market over the past decade has Current evidence suggests that
been huge. Over 10 years, the number sellers of prime housing stock have
of £1m+ sales recorded by HMRC absorbed this cost through a one
across the UK has tripled, with an off price adjustment to reflect the
“Taxation is likely to be estimated 18,000 sales last year. buyers additional liability. This seems
a key issue affecting Little surprise then that it is a
submarket that has attracted the
to have allowed the market to remain
fluid in the immediate aftermath of
the prime housing attention of politicians across all the changes.
markets in 2015” parties looking for ways to raise
tax revenues.
However, it is still most likely to
make political debate around further
Sophie Chick, Savills Research Taxation is likely to be the key taxation even more contentious,
issue affecting the prime housing even if, as expected, it has a mildly
soporific effect on the market in the
run up to the election.
This will mean sellers will have
A year of two halves to be realistic on sale price in 2015.
However, buyers should be able to
take comfort from the medium term
How did the prime markets fare in 2014? outlook for the market which remains
broadly positive. n
Much like the mainstream, the prime The experience of 2014, gives us clues as to
housing market across the UK saw a year what may happen in 2015 and beyond.
of two halves in 2014. The improving
economy and positive sentiment from the In London the strongest performers in 2014
mainstream market helped drive demand
in the first half of the year with an average
price increase of 4.9% recorded in the
prime markets of London and 3.1% outside
were the markets up to £1m and in the
£1m-£2m range. These saw annual price
growth of 6.0% and 2.5% respectively,
reflecting the fact that they are less adversely
18,000
The estimated number
the capital. affected by the changing tax environment. of £1m+ sales in 2014
Some of this momentum was lost over the In the prime regional and country house
across the UK
summer as the uncertainty surrounding markets, London commuter locations showed
the Scottish referendum and ongoing the highest level of growth, with prices rising
discussions around a mansion tax by 4.6% in the London suburban markets such
contributed to a general lack of urgency Esher, Rickmansworth and Loughton and by
among buyers. When combined with the 3.7% in the inner commuter zone in the likes of
impact of the new rates of stamp duty Sevenoaks, Guildford and Beaconsfield.
introduced in the Autumn Statement, house Over the past 10 years
prices remained roughly flat in the final six Beyond the commuter zone prices still remain
months of 2014 in the prime regions with an below the level seen prior to the credit crunch,
the number of
average increase of 0.1% while small falls presenting an ongoing buying opportunity for £1m+ sales has
of -2.2% were recorded in London. those looking to relocate. increased three-fold
06February 2015
The rise of the £1m+ market
London blazes a trail with the highest number of £1m+ sales in 2014
The Land Registry indicates that by far the £1m+ sales. This has not just been confined North of England and Scotland are
biggest increase in £1m+ sales has been in to emerging prime markets in boroughs such yet to return to the peak level of high
London. Where the number of recorded sales as Hackney and Lewisham but also in parts value transactions.
at or above this threshold has risen by 80% of Southwark, Brent and Greenwich.
since the 2006-07 period. The big winners have been prime urban
Smaller increases were recorded across areas such as St Albans, Bath, Brighton,
Across London, emerging prime areas the remainder of the South of England, Cambridge, Cheltenham, Oxford and
have seen the biggest percentage growth in while the markets of the Midlands, the Stratford upon Avon.
Biggest increase in £1m+ sales by Local Authority in 2013/14 and increase since 2006/07
Aberdeen 54 35%
Derbyshire Dales 13 225%
Cheshire W &
Warwick 21 163% 24 14%
Chester
Rutland 16 129%
Christchurch 13 333% Cambridge 108 200%
Exeter 16 220% Suffolk Coastal 27 125%
Cheltenham 36 200% North Norfolk 15 114%
Oxford 135 187% Hackney 192 814%
Lewes 41 173% City of London 111 640%
Brighton & Hove 97 155% Lewisham 75 275%
Highest number of £1m+ sales by Local Authority in 2013/14
Edinburgh 133 Elmbridge 864 Kensington
2731
& Chelsea
Aberdeen 54 South Bucks 281
City of
Glasgow 17 Windsor & 2565
236 Westminster
Maidenhead
Stratford-On-Avon 43 Wandsworth 1469
Cheshire East 112
Birmingham 32
Trafford 66
Solihull 22
Harrogate 31
Bath &
150
NE Somerset St Albans 268
Poole 112 Three Rivers 150
Wiltshire 81 Hertsmere 133
Source: Land Registry, Register of Scotland NB: The Land Registry undercounts the number of sales at the top end of the market. The analysis only includes locations with 10 or more £1m+ sales in 2013/14
savills.co.uk/research 07Residential Property Focus
Mainstream market
A Fine
This means any government will
have a fine balancing act when it
comes to housing over the life of the
Balancing Act
next parliament.
Prior to that, a closer look at the
second half of 2014 points to a more
subdued housing market in the run-up
to the general election, which may
again bring housing to the fore of the
political debate.
I
House prices
The gap in the mainstream market f the housing market is Almost all of the house price growth
considered a barometer of of 2014 was realised in the first six
between the ‘haves-and-have-nots’ the electorate’s satisfaction, months of the year and prices have
is an issue for any future government then on the face of it there been flat since June. Parts of London
was plenty of good news – that, following a longer term trend,
in 2014: house prices ended the saw by far the strongest price growth
year up 7.2% according to the in the first half of the year - have now
Nationwide; transactions rose begun to see prices soften according
Words: Neal Hudson by 16% to more than 1.2 million to some measures.
Twitter: @resi_analyst per year; the number of first-time Perhaps the most important
buyers increased by 21%; stamp constraint of price growth in the second
duty was reformed and house half of the year was the introduction of
building activity improved with stricter mortgage affordability testing by
starts reaching 140,000 for the first the Bank of England.
time since 2008. This limits the risk of buyers over-
Undoubtedly, this has been extending themselves and lenders
good news for many homeowners exposing themselves to too much risk,
and for some aspiring homebuyers. as and when interest rates rise.
“Almost all of the However, it is equally apparent that It also effectively caps the amount
house price growth of the gap between the housing
‘haves-and-have-nots’ remains
home buyers can borrow, so it should
come as no surprise that average loan-
2014 was realised in largely unresolved, something which to-income multiples peaked in June.
the first six months” is exemplified by the tension between
‘desirable’ mortgage regulation and
It appears likely that we will see
static or slight declines in lending
Neal Hudson, Savills Research ‘less desirable’ reduced access to multiples in coming years and so
homeownership. house price growth will be limited
FIGURE 2
Transactions by buyer type
■ Mortgaged First Time Buyer
■ Mortgaged Home Mover
■ Mortgaged Buy-to-let
■ Cash Only
Mortgaged Mortgaged Mortgaged Cash 800,000
First time buyer Home mover Buy-to-let only 700,000
600,000
313,400 368,200 101,470 436,660
Annual transactions
500,000
Nov-14 Nov-14 Nov-14 Nov-14
400,000
+70% +24% +89% +56% 300,000
v Nov 09 v Nov 09 v Nov 09 v Nov 09 200,000
100,000
-15% -46% -44% -0% 0
v Nov 07 v Nov 07 v Nov 07 v Nov 07
Mar 06
Oct 06
May 07
Dec 07
Jul 08
Feb 09
Sep 09
Apr 10
Nov 10
Jun 11
Jan 12
Aug 12
Mar 13
Oct 13
May 14
Source: Savills Research
08February 2015
by income growth in mortgage GRAph 2
dependent markets. Our forecast for Transaction levels and housebuilding: A close fit
mainstream UK price growth over the
■ Annual Transactions ■ Annual Private Housing Starts
next five years is 19.3% compared to
19.9% for incomes (see page 14). Year to Dec 1988 Year to Sept 2014
2,500,000 250,000
Transactions 2,068,000 Transactions 1,049,160
Transaction levels Housing Starts 204,300 Housing Starts 113,020
Compared to house prices, the 2,000,000
Year to Dec 2004
200,000
Transactions 1,791,000
increase in transactions will be
Annual private housing starts
Housing Starts 166,070
Annual total transactions
considered more universally as good
news. Yet, despite a large increase in 1,500,000 150,000
activity across all buyer types, the only
group that has got anywhere near their
pre-recession levels are those without 1,000,000 100,000
a mortgage.
Year to June 2009
Much like prices, the number of Transactions 614,770
500,000 50,000
mortgage approvals and transactions Housing Starts 55,530
peaked early in the year and have been
falling since on a seasonally-adjusted
0 0
basis. This reflects the incredibly
1978
1980
1982
1984
1986
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
strong start to 2014 following the
launch of Help to Buy 2 and so we Source: Savills Research
will probably see transactions level
out during the first half of 2015 before
continuing their slower paced recovery GRAph 3
up to 1.34 million in 2019. House price trends: RICS as a lead indicator in London
Housebuilding ■ RICS London house prices over last 3 months (Ihs) ■ HMLR London 3 month house growth (rhs)
Given the relationship between total 150 8%
market transactions and private
housebuilding, it’s not surprising to 6%
100
see that private housebuilding starts
3 month house price growth
4%
are beginning to level off along with
Net balance of opinion
50
the wider market. Despite significant 2%
support for housebuilders and home
buyers, this relationship essentially 0 0%
remains unbroken. Developers’ sales
-2%
rates, though clearly supported by -50
government measures, appear to -4%
remain ultimately limited by demand -100
in the wider market. -6$
Therefore, whatever the merits of -150 -8%
current policy, any serious attempt
Dec 2004
Dec 2005
Dec 2006
Dec 2007
Dec 2008
Dec 2009
Dec 2010
Dec 2011
Dec 2012
Dec 2013
Dec 2014
to substantially increase the rate of
housebuilding to the levels required
needs an increase in delivery across Source: Savills Research
all tenures to break the relationship.
Looking forward It has been encouraging to see
Overall, the news coming out of the politicians deal with this long overdue
housing market appears to be turning reform as the centrepiece of the
slightly negative ahead of the election, Autumn Statement. However, it is
but with the Bank of England limiting one small part of a much bigger
the capacity for mortgage lending and jigsaw, that in reality needs even
interest rate rises on the horizon, the more political will to assemble. n
political options for giving the market
another short term boost are limited.
19.3%
To the surprise of many, the
Chancellor attempted to do just
that with his reform of stamp duty
in the Autumn Statement. The
new system has removed the slab
5-year UK mainstream
structure and lowered the potential house price growth
cost for most buyers, which has been forecast to 2019
almost universally welcomed.
savills.co.uk/research 09Residential Property Focus
Market dynamics
the effect of the london
affordability squeeze
I
Affordability constraints will limit n London, the total value repayment requirements. Coupled
of housing rose by 20% with fast-moving house prices
house price growth in mainstream or £247 billion in 2014 alone against a context of limited income
London over the next five years and by 61% or £563 billion growth, this means higher deposits
over the past five years. are required.
This has huge consequences for Jump forward five years and we
Londoners, whose finances are expect that prices will grow just
being stretched further and further 10.4%, as fewer first time buyers
Words: Katy Warrick as house prices continue to rise will have been able to access home
Twitter: @katywarrick at a disproportionate rate to the ownership for these reasons.
rest of the country.
This value gap simply cannot widen Affordability examples
at this rate indefinitely, which is why The infographic below shows how
we expect mainstream London to see the average person in London is
just 10.4% growth over the next five struggling to keep up with house
years, compared to 19.3% across price growth in this changing lending
the UK as a whole. environment and how we see the
“We are already market in 2019 being slightly more
seeing some of Why just 10.4%? balanced (see Figure 3).
Mortgage regulation is one of
these affordability the main constraining factors to Third Quarter 2013
implications play out” further house price growth. This new
lending environment is one of loan
At the end of the third quarter of
2013, a first time buyer household
Katy Warrick, Savills Research to income caps, stress testing of earning £53k (the median in London
borrowers’ affordability and capital according to CML), could have
FIGURE 3
Affordability What an average first time buyer in 2013 could afford over time, allowing for house price
Q3 2013 Based on 3.1% interest rate Q3 2014 Based on 3.1% interest rate
Mortgage Mortgage
£46k
Shortfall
repayments repayments
21% 21% com
e
f in
of income of income
83 %o
123% of income £65k
Deposit
123% of income £68k
Deposit
£199k £206k
Mortgage Mortgage
3.74 x income 3.74 x income
House price Same house
Household income Household income now costs
£53k £264k £55k £320k
Source: Savills Research
10February 2015
afforded to buy a property worth value ratios remain the same, Together with the cost of the
£264k at 3.74 loan to income multiple our buyer could now obtain a deposit which buyers need to
with a 75% loan to value mortgage. property worth £324k with a £252k accumulate, these also have
This assumes they could raise the mortgage. This means that while the implications for transactions levels.
required £65k deposit. At prevailing funding shortfall is reduced, it still This will place more demand on the
interest rates servicing this mortgage sits at £29k. private rented sector or the hotel of
would account for 21% of gross Even if that shortfall can be found, Mum and Dad.
household income. the costs of servicing the mortgage But, assuming local governments
will have increased to 26% of gross respond to the changing housing
Third Quarter 2014 income because of interest rate needs, it will also present developers
Over the course of 2014 incomes rises. This 26% is much higher than with an opportunity to build for the
grew by 4%, and if we assume the the 21% average of the past 20 private rented sector and develop
same mortgage conditions as before years. Essentially, this would mean the intermediate housing offering. n
our hypothetical buyer can now affordability would be as stretched as
borrow £206k and afford a property it was prior to the credit crunch.
worth £274k. The amount they can If, however, the 2019 shortfall
afford has risen by 4%, but, as we
have seen, house prices will have
is added to borrowing it would be
necessary to get an 80% LTV, 4.18 supply shortage
risen much more. LTI mortgage. This would mean
In this example, the £264k house that the cost of capital and interest Identifying the hidden value
is now worth £320k, resulting in a repayments would shoot up to 29%
funding shortfall of some £46,000. of gross income. This is a level not Despite these affordability issues there is still
The options for buyers are pretty seen since the affordability driven a shortage of new supply in London – we are
stark – find a much bigger deposit, downturn of the early 1990s, so it currently building less than half of the 50,000 new
borrow more money at an even is highly unlikely that this level of homes required in the capital every year. This is
higher multiple of income (4.57x lending would be sustainable. one of the fundamental reasons why we do not
earnings), or buy a smaller property expect average price falls across London in 2015,
or one in a less expensive area. The Consequences despite the recent change in sentiment.
first two options may not be possible, These affordability considerations
the last may not be desirable. limit future price growth potential. For developers there will undoubtedly be pockets
While, annual price growth across of hidden value which will see growth levels above
Third Quarter 2019 all of London averaged 17.8% during the average, though it will require them to place
If we fast forward to 2019, our 2014, the last six months saw just significant emphasis on unlocking it through the
subject property would be worth 1.6% according to the Nationwide. nature and scale of the development they undertake.
£353k while incomes will have This indicates that we are already
risen by 22% according to Oxford seeing some of these affordability
Economics. Assuming loan to implications play out.
inflation and income growth over the period
Q3 2019 Based on 5% interest rate
Mortgage
£29k
Shortfall
repayments
26% com
e
of income of in
44%
106% of income £72k
Deposit
£252k
Mortgage
3.74 x income
Same house
Household income now costs
£67k £353k
savills.co.uk/research 11Residential Property Focus
Housing
an emotive
Another topic we can expect to
dominate the airwaves, is the argument
surrounding empty homes in London.
ELECTION issue…
Despite the lack of robust evidence
that this is a large scale problem,
Labour recently announced plans to
levy charges on absentee property
owners but details have yet to emerge.
Less controversial are measures
from all sides aimed at increasing
the number of first-time buyers. The
A
Conservatives intend to build on
…but what the market really s polling day the already extended Help to Buy
approaches, housing policy with the new Starter Home
needs are long-term solutions that is set to become scheme (see Table 2) while Labour
extend beyond electoral cycles one of the chief has gone further stating an intention
political battlegrounds to double the number of first-time
with politicians of all stripes buyers by 2025. In a country where
emphasising short-term, headline- homeownership remains a major
grabbing policies faster than you aspiration, this is safe political ground.
Words: Susan Emmett can say ‘housing crisis’. Unfortunately, election-focused
Twitter: @saemmett A persistent shortage of homes, soundbites will not deliver a better
against a background of strong functioning market. At best, welcome
house price growth in some areas measures to help first-time buyers,
and increasing affordability pressures are only part of the solution. At worst,
on younger would-be buyers, is likely policies launched without real research
to lead to heated debates ahead of into their consequences could have
“Election-focused one of the most uncertain elections adverse effects on the market.
soundbites will not for decades.
Labour’s plans to levy a Mansion
A heavy-handed approach towards
overseas buyers risks hindering
deliver a better Tax on properties worth £2m or more investment and inhibiting house
functioning market” has so far attracted the greatest
controversy, even among the party’s
building rather than helping to deliver
more homes. In its current form,
Susan Emmett, Savills Research own London MPs. But there is more Mansion Tax is likely to distort the
debate to come. property market and penalise certain
parts of London where values have
risen steeply.
GRAph 4
What the housing market really
Housing shortage continues needs are long-term solutions that
■ New planning consents ■ New home starts
extend beyond electoral cycles and
party politics. As we can see from
Graph 4, the planning reforms of the
350 last three years, have helped deliver a
greater number of planning consents.
Additional households/homes in England (000s per annum)
184,000 new homes Housebuilding now needs to catch up.
300 were started in
2007… Liberal Democrats targets We need to support a wider range
National Planning Policy of players (small enterprises, housing
250 Framework (NPPF) was associations and Local Authorities) to
introduced in 2012 Housing need projections deliver homes which are not only for
sale but also aimed at renters and
200
Labour targets people struggling to buy.
We also need to have an honest
150 debate on taboo subjects such as
the green belt – a no go area ahead
...compared with of an election particularly in marginal
100
86,000 in 2009 constituencies. Long-term solutions
139,000 new homes require cross-party support.
50 were started over The good news is that behind the
the past year scenes, there is a growing consensus
among all major parties that the
0
country needs more homes. If the
2003 Q1
2004 Q1
2005 Q1
2006 Q1
2007 Q1
2008 Q1
2009 Q1
2010 Q1
2011 Q1
2012 Q1
2013 Q1
2014 Q1
2015 Q1
2016 Q1
2017 Q1
current opinion polls are correct and
we end up with either a minority
government or another coalition,
Source: HBF, DCLG, TCPA we will need to build on that. n
12February 2015
Table 2
Party policies Where the three main political parties stand on housing approaching the election
XXXXX Coalition Government Conservatives Liberal Democrats Labour
Measures to increase housing Target of 300,000 new Target to be building over
supply include: Help to Buy homes a year by 2020 200,000 new homes a year
to support buyers, Affordable by encouraging offsite by 2020, by encouraging
Homes Programme to deliver construction, support for a greater diversity players.
200,000 new affordable Have not specified SMEs, new entrants and SMEs to be supported by
homes by 2019, New Homes a building target. self-build and boosting “Help to Build” programme
Bonus to incentivise councils Housing Association which underwrites bank
Housebuilding to grant planning consent capacity. Further measure: loans for smaller builders.
and Builders Finance Fund creation of a new Housing “Use it or lose it” measures
to help SME access finance. Investment Bank to simplify to discourage land banking.
the allocation of public funds.
Build 100,000 Starter Homes
on brownfield land to be sold Support for shared Double the number of
at 20% below the market Starter Homes and ownership, rent-to-buy first-time buyers by 2025.
rate to first-time buyers aged Rent-to-Buy are also and other intermediate First-time buyers to
under 40. Meanwhile, Rent- Conservative policies. tenures, where every be given priority access
First time to-Buy enables tenants to monthly payment goes to housing within
buyers rent a home at a discount towards owning the house. “Housing Growth Areas”.
to help save for a deposit.
Drive to increase the Make 3yr tenancy
number of professionally- A Lib Dem private members agreements the norm rather
managed homes for bill to protect tenants against than 6 or 12 months. Annual
private rent includes Against rent controls. retaliatory evictions currently rent review with an upper
£1bn Build-to-Rent fund to going through Parliament. ceiling on rent increases.
Private rented
deliver 10,000 rental homes. Letting agents banned from
sector
charging fees to tenants.
National Planning Policy Strong supporters of Proposals for Local
Framework (NPPF) set out Vociferous public localism agenda. Some Authorities to designate new
a “presumption in favour commitment to the green criticism of Coalition “Housing Growth Areas”
of sustainable development” belt and to support the planning policies such as the which will have powers to
to speed up housing delivery. localism agenda which permitted development rules assemble land and give
It followed the Localism Act gives locals more say allowing offices and shops certainty to developers.
Planning and which gave locals greater over development in their to change into housing Mandatory for Local
green belt
say over housing. neighbourhood. without planning permission. Authorities to have a Local
Plan to meet housing needs.
Published a prospectus for
locally-led garden cities of Aspire to build at least Plans to build 200,000
at least 15,000 new homes. Support the idea 10 garden cities, with homes a year include a
Also announced support but have resisted naming five along a new Garden new generation of new
for new garden cities at any new sites. Cities Railway joining Oxford towns and garden cities.
Garden cities Ebbsfleet in Kent and and Cambridge
Bicester in Oxfordshire.
An annual tax on properties Labour expects to raise
Recent reforms of the worth £2m, proposed in £1.2bn a year by taxing
Stamp Duty Land Tax place 2009, has developed into homes over £2m to help
a bigger burden on higher Against a Mansion Tax. an additional banded levy fund the NHS. The tax will be
value properties. on top of council tax to be progressive with owners of
Mansion tax collected by Local Authorities homes worth £2-3m paying
then pooled. an extra £250 a month.
Source: Savills Research
savills.co.uk/research 13Market forecasts
House prices 2015-2019
prime markets Five-year forecast values*
2015 2016 2017 2018 2019 5-year
Central London -1.0% 8.0% 6.5% 5.0% 5.0% 25.5%
Other London 0.0% 6.0% 5.0% 4.0% 4.0% 20.4%
Suburbs 1.0% 7.0% 6.0% 5.0% 4.5% 25.7%
Inner Commute 1.0% 7.0% 5.5% 5.0% 4.5% 25.1%
Outer Commute 1.0% 6.0% 5.5% 5.0% 5.0% 24.5%
Wider South of
England
1.0% 4.5% 5.0% 5.0% 5.0% 22.2%
Midlands/North 1.0% 4.0% 4.0% 5.0% 5.0% 20.4%
Scotland 0.0% 4.0% 4.5% 4.0% 4.0% 17.5%
Source: Savills Research *Assuming no mansion tax but allowing for revision of the council tax system NB:
These forecasts apply to average prices in the second hand market. New build values may not move at the same rate
Mainstream markets Five-year forecast values
2015 2016 2017 2018 2019 5-year
UK 2.0% 5.0% 5.0% 3.0% 3.0% 19.3%
London 0.0% 3.0% 3.0% 2.0% 2.0% 10.4%
South East 3.0% 6.5% 6.5% 4.0% 4.0% 26.4%
South West 2.5% 5.0% 5.0% 3.5% 3.5% 21.1%
East of England 3.0% 6.0% 6.0% 4.0% 4.0% 25.2%
East Midlands 2.0% 5.0% 5.0% 3.0% 3.0% 19.3%
West Midlands 2.0% 4.5% 4.5% 3.0% 3.0% 18.2%
North East 1.0% 3.5% 3.5% 2.0% 2.0% 12.6%
North West 1.0% 4.0% 4.0% 2.0% 2.0% 13.7%
Yorks & Humber 1.5% 4.5% 4.5% 2.5% 2.5% 16.5%
Wales 1.5% 4.0% 4.0% 2.5% 2.5% 15.3%
Scotland 3.5% 4.0% 4.0% 2.5% 2.5% 17.6%
Source: Savills Research NB: These forecasts apply to average prices in the second hand market. New build values may not move at the same rate
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