There are 18 areas in the UK where economic fundamentals suggest there are good opportunities for developers at a time when the government wants to build more homes than ever.
An analysis from international real estate firm Knight Frank and planning consultancy Barton Willmore names them as Leeds, Manchester, York, Durham, Birmingham, Nottingham, Warwick, Leicester, Brentwood, South Cambridgeshire, Bristol, Bath and North East Somerset, Exeter, Cherwell, South Oxfordshire, Guildford, Reigate and Banstead and Tunbridge Wells.
Factors examined included economic growth, employment growth, stock to sales ratios, affordability and liveability. These rankings were then placed alongside the latest conditions in the local planning environment as well as local knowledge, to highlight areas which suggest there is the possibility for outperformance for developers, not only in terms of pricing but also market absorption.
Justin Gaze, joint head of residential development at Knight Frank, said developer interest is now much wider than just London. ‘Increasingly, our clients are looking at regional cities and districts for future potential and the report demonstrates from an economic and planning perspective where these development opportunities are likely to be,’ he explained.
According to Iain Painting, planning partner at Barton Willmore, these opportunity areas are aligned with the increased emphasis on urbanisation, focusing on many of England’s key cities, but also demonstrate that development opportunities are not purely based in the South East.
In the North of England it is Manchester and Leeds that are expected to be among the areas which will experience the strongest rates of household growth over the next 10 years, while York scores particularly highly on liveability rankings.
The report suggests that the green belt will pose constraints for developers in and around Durham and York but at the same time, there is a need for more site identification, as these two areas do not yet have a five year land supply. York boasts policies to boost housing supply as it has been identified as one of the first Housing Zones in England.
Meanwhile, Leeds plays host to an Enterprise Zone and the North East Combined Authority, of which Durham is one of the constituent boroughs, has also bid for 175 hectares of Enterprise Zone over 10 sites. The report points out that this new combined authority has just been granted extended powers over housing.
Of the four Development Opportunity areas, only Leeds has an approved local plan and as policymakers push ahead with the ‘Northern Powerhouse’, especially the transport infrastructure to support this, the opportunities in the North of England will widen, it adds.
The report explains that not only does Birmingham have an Enterprise Zone, but also a planning department committed to large scale regeneration of many parts of the city. Nottingham is also an Enterprise Zone area and has a local plan and five year land supply in place. ‘However, our data shows that the current pipeline supply of schemes in this local authority may fall short of household growth projections,’ the report says.
Further south, Warwick scores highly on liveability, and also has strong employment growth forecasts, while strong household growth is projected in Leicester. In the East the arrival of Crossrail in 2018 will make Brentwood, an already attractive area of Essex even more so. Direct trains to Bond Street will take 44 minutes, cutting nearly 10 minutes from the journey time as well as the need to change trains.
The report also points out that Brentwood has one of the strongest forecasts for employment growth, as well as showing one of the largest imbalances between pipeline supply and household growth over the next five years.
South Cambridgeshire also has a particularly strong forecast for employment growth, and has been rated the best place to live in an independent survey of rural locations across the UK. But it does not yet have an approved local plan in place for housing, and has not quite met its five year housing supply. There are questions about whether more green belt land should be released for development.
In the South West both Bristol and Bath and North East Somerset have a local plan and a five year housing supply, and the determination to step up development is underlined by the policy environment, with a local enterprise zone in Bristol’s Temple Quarter. Exeter doesn’t yet have a post NPPF local plan, but has identified three sustainable urban extensions.
The report explains that South East Cherwell and South Oxfordshire will both benefit from transport infrastructure improvements with a new train line taking passengers from Oxford Parkway and Bicester Village to London Marylebone, and a possible new junction to the M40 at Bicester.
Indeed, Bicester has also been identified as a Garden Town, which will translate into more funding and support for housing. ‘The Science Vale in South Oxfordshire is positioning itself as a global hotspot for enterprise and technology. Parts of the Vale have been granted Enterprise Zone status,’ the report adds.
Guildford and Reigate and Banstead are described as being in a position to take advantage of the housing need in the capital. ‘Sitting just beyond the M25, these local authorities, which have strong forecast economic growth over the next five years and which are well above average in the liveability rankings, both have a shortfall in their five year land supply, and Guildford does not yet have an approved local plan in place,’ the report says.
Tunbridge Wells has one of the highest liveability scores in the country and is also forecast to have strong economic growth. The pressure for more housing is well documented, however the report suggests that the green belt is a constraint. There is as yet no local plan in place and there is a shortfall in the identified five year land supply.
The report also explains how there has been a cumulative shortfall in housing of around 330,000 units since 2008. However, the situation is improving. Construction starts in England in the second quarter of this year were 94% higher than in the same quarter in 2009, but there is still some way to go. In the year to July, around 113,000 units were started, down from 152,000 during the same period a decade ago.
Another measure of future activity, pipeline planning, suggests that the upward trend will continue. Data from Glenigan, the construction analysts, shows that there were more than 293,000 units with planning permission across the UK in April this year, up from 253,000 in April last year, and 184,000 in April 2013.
‘However, it is worth noting that there is no guarantee that all schemes with planning will come to fruition, especially due to the increasing number of planning conditions applied to successful planning applications which can affect the final viability of a scheme. Development land prices are also moderating, although this partly reflects the increased costs of development, with a sharp rise in the cost of materials and labour in recent years,’ the report concludes.