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Savills World Research UK Residential

Spotlight Residential Development 2017

SUMMARY Future opportunities for meeting Hertfordshire’s housing need

■ Strong house price growth: process of developing new local ■ New Opportunities: Infrastructure House prices have grown by 11.7% in plans. This provides an opportunity improvements are likely to open up the past year, and sit 48.9% above the to strategically address the land new areas for housing development. 2008 peak. The strongest performing supply challenges facing the The largest opportunities could be areas in the last year have been North area. Co-operation between local unlocked through Crossrail 2 in the Hertfordshire and . P2/3 authorities will be essential. P4/5 east of the county and upgrades to the A1(M). P4/5 ■ Stretched Affordability: Strong ■ Housing Supply: Hertfordshire house price growth, combined with has not seen enough housing high housing demand and a delivery development to meet need in “Hertfordshire has not seen shortfall has resulted in some of the recent years. There is a pipeline of highest housing affordability pressure over 23,000 new homes, but more enough housing development in the country. P2/3 sites need to be identified. This situation is complicated by the large to meet need in recent years” ■ Planning Policy: Many local amount of land designated as Green Savills Research authorities in the county are in the Belt. P4/5 savills.co.uk/research 01 Spotlight | Hertfordshire Residential Development

Housing The county is home to leading companies in science STRONG GROWTH, and pharmaceuticals, bene ting from good connections to . GlaxoSmithKline and NEW CHALLENGES Airbus have research facilities at sites in Stevenage and Ware, employing over 2,700 people. On a smaller scale, Stevenage Bioscience Catalyst and BioPark in Garden City have proven to be excellent locations for new and Hertfordshire has seen strong ertfordshire’s thriving growing biopharmaceutical research house price growth, driven both economy has seen and technology businesses. In the population growth of south west of the county, the lm by its own economy, and excellent 11.9% over the past studios at and Leavesden links to London. A lack of supply is 10 years, compared Studios draw interest and investment toH 8.2% nationally, and the number from across the globe. leading to stretched affordability of households in the county is Links with the capital are also projected to increase by a further good, attracting London commuters 15.5% by 2030. Employers are seeking more space and a balance drawn to the region by a strong between city and country life. 25.9% workforce with high economic of the population of Hertfordshire participation. 35% of residents work in London. London commuters are qualied to degree level. and Hertfordshire’s own economy

FIGURE 1 Average transaction values in Hertfordshire Year to June 2017

Average Transaction Value Year to June 2017

■ Below £200,000 ■ £200,000 – £400,000 ■ £400,000 – £600,000 ■ £600,000 – £800,000 ■ Over £800,000

Source: Savills Research

02 2017

contribute to one of the strongest The problem will get worse if local meet need will define the plan making housing markets in the country. authorities and developers cannot process for many local authorities. Additional demand is likely to produce major housing development come in the future from , where to meet the county’s need. This Infrastructure Stansted, the UK’s fastest growing could hinder economic growth, as There are many opportunities for airport, and the relocation of Public affordability pressures will prevent increased housing delivery if the Health to are likely to people from moving to the county. right strategies can be put in place. boost economic growth. The Hertfordshire Local Enterprise Future opportunities Partnership has identified the three Housing market The county is not dominated by one major radial corridors from London, Hertfordshire’s housing market city, but is instead has a network of (M1, A1(M) and M11) as areas for has seen strong growth from 2009, smaller urban areas. The new towns infrastructure driven growth, which driven by the varied local economy, of Hatfield, , could in turn drive more residential and strong links to the capital. Prices Stevenage and development. are currently 48.9% above their are home to over a quarter of the Crossrail 2 has the potential to previous peak in 2008, according to county’s population. These towns are drive further growth as it will offer an Land Registry data, and house prices well connected, but are in need of alternative route into Central London have grown 11.7% across the county town centre regeneration. from the south east of the county. over the past year, compared to Elsewhere, 53% of the land in Transport for London estimates 7.7% nationally. the county is designated as Green Crossrail 2 has the potential to aid the However, the highest value Belt, which places severe limits on delivery of over 200,000 homes along areas which had the strongest price the amount of land able to come the line, with around half of the growth growth after the 2008 recession forward for development. The less potential focused in the northern part have in recent months seen the constrained land in the north of of the route. market slowing, with values in St the county does not benefit from Although Crossrail 2 is unlikely Albans growing by only 1% in the the same quality of transport links, to be delivered until the 2030s, the last six months, compared to growth placing additional infrastructure proposed four-tracking of the line from of over 5% in the same period in burdens on developers. into Liverpool Street will . The tension between protecting increase the speed and frequency of The highest residential values in the Green Belt and providing enough services, and could act as an earlier the past year have been achieved land for residential development to catalyst to unlock sites. n in the rural areas around Hemel Hempstead, and , where in the year to June 2017 average transaction values were at least £600,000, and in some areas exceeded £800,000. There are still some pockets of the county 11.9% 15.5% where average transaction values Population growth Projected household remain around £200,000, such as over past 10 years and Stevenage. growth to 2030

Affordability pressures FIGURE 2 There are, however, significant challenges facing the region if it is to Housing affordability ratio continue this high level of growth. 18.00 The lack of supply has contributed to rising prices. 3,500 new homes 16.00 were completed across Hertfordshire in 2015-16. This is over 2,000 homes 14.00 fewer than the objectively assessed 12.00 need figure for the county. However, 10.00 this represents an improvement on England average the period of 2012-2015, which saw 8.00 fewer than 3,000 homes delivered in the county each year. 6.00 Affordability pressures are becoming an increasing problem. 4.00 Only Stevenage has a median 2.00 income to median house price ratio Ratio of median houseprices to incomes that is below the England average. 0.00 In St Albans, median house prices St Albans Three Hertsmere East Broxbourne Welwyn North Stevenage Rivers - Hatfield Hertford- are over 16 times median incomes, shire shire the second highest of any local authority outside London. Source: DCLG

savills.co.uk/research 03 Spotlight | Hertfordshire Residential Development 2017

Housing supply FIGURE 3 IN THE Hertfordshire Development Opportunities PIPELINE ● Proposed Garden Town 5 –– Crossrail 2 Unconstrained land: There are some areas ■ Green Belt of the county where there are fewer constraints ■ Town Centre Regeneration on development. Part of the solution to meeting the demand for new housing may be to increase The local authorities in development in the north and east of the county. 6 There is already a large immediate pipeline of Hertfordshire need to provide developments with capacity for 1,350 units 30,000 homes over the next A1(M) capacity improvements: Both Stevenage and North emerging around . The downside to Hertfordshire have identi ed that capacity improvements this approach is that the area doesn’t have ve years, but where are the will be needed before signi cant housing developments can the same level of infrastructure and transport opportunities? proceed. However, strategic sites served by the motorway connections to major economic centres as the have already been identi ed with potential to accommodate south west of the county. over 10,000 units once there is suf cient road capacity.

here is a pressing need in Hertfordshire 2 to identify enough land for residential 1 development to meet the need of the Green Belt: 54% of land in the county is greenbelt. 6 5 growing population. The SHMA targets Hertsmere, Three Rivers, Welwyn Hat eld and St Albans Garden Towns: Park is a for the 10 local authorities in the county have a particularly high proportion. As these local authorities proposed Garden Town to the north totalT nearly 30,000 new homes over the next ve consult on their emerging local plans, there is an opportunity of Harlow. It has been allocated years. Under the newly published standardised to consider if land can be released through a greenbelt review for up to 10,000 homes in the East approach to calculating housing need, this would rise process as outlined in the recent Housing White Paper. Hertfordshire Local Plan. There to almost 35,000 homes. We have identied 23,300 are also proposals for a new village homes in the immediate development pipeline. of 1,000 units at Symondshyde in Currently three local authorities, , Hat eld, and over 500 homes at High North Hertfordshire and Stevenage, have a published Leigh Garden Village. New settlements housing land supply of less than ve years. Our could make a signi cant contribution to analysis, calculating housing need based on the Hertfordshire’s housing supply over the latest SHMA gures, suggests that a further three next two decades, but will require large authorities, St Albans, Three Rivers and Welwyn 1 amounts of infrastructure investment Hat eld also have not identi ed enough land for and are not an immediate solution to development to meet need. the supply shortage. The failure to allocate sites for housing leaves local authorities vulnerable to “planning by appeal”; that is, having to grant permission to potentially contentious 2 projects at appeal as they cannot demonstrate Published Annual suf cient numbers of units coming forward on other Post NPPF 4 Local Authority 5 year land SHMA sites. It is preferable to have a de ned development Local Plan? strategy with sites allocated through up to date local supply? target plans. There is particular sensitivity in this area due to Broxbourne 250 the large amount of greenbelt land. û ü However, many local authorities are yet to produce 3 Dacorum 756 an NPPF compliant local plan, and there is a need 3 ü ü for local authorities to work together to ensure Town centre regeneration: Another East Hertfordshire û û 846 need that can’t be met in one local authority can be option to increase housing supply is through town centre regeneration and Hertsmere 599 accommodated elsewhere. The recent joint SHMA 4 ü ü produced by Dacorum, Hertsmere, Three Rivers and densi cation. Regeneration around North Hertfordshire Watford is a step in the right direction. Watford Junction could support the Crossrail 2 will provide improved links û û 700 delivery of around 1,500 new homes into London, making the Upper Lea Valley The Local Plan process also provides an St Albans 705 opportunity for greenbelt release in order to provide alongside 500,000 sq ft of commercial a more appealing location for people û ü oor space. There are also proposals for a land for sustainable development. ■ moving out of the capital. Although Stevenage 365 £105m private sector reinvestment project Crossrail 2 may not be completed until û û in Bishop’s Stortford, the Town Centre 2033, there are proposals for the line into Three Rivers û ü 514 North scheme in Welwyn Garden City and Liverpool Street Station to be increased “Seven of the ten local smaller schemes in Hemel Hempstead, from two to four tracks, which would Watford ü ü 577 Stevenage, Hat eld and Hertford. unlock the extra capacity earlier. authorities do not have an Welwyn Hateld û ü 686 up to date Local Plan” Source: Savills Research

04 savills.co.uk/research 05 Spotlight | Hertfordshire Residential Development

Demand Analysis WHAT TYPE OF NEW HOMES AND FOR WHO?

New build homes in Hertfordshire ew home sales Buyers of new homes in accounted for 10.3% Hertfordshire tend to be aged can help to ll gaps in the second of all transactions in between 30-49 years old, looking hand market Hertfordshire in 2016, to buy their primary residence, and according to Land drawn from the local area, according RegistryN data. The bulk of new to Savills dealbook data. 64% of build ats are sold for between purchasers were moving within £250,000 and £350,000. New build Hertfordshire, and 84% were buying houses have a broader price their main residence. range, but there is a clustering There is also a signi cant of transactions between £500,000 proportion of buyers, around 20%, and £800,000. who are moving out from London.

FIGURE 4 New build sales 2016

Number of sales 20 40 60 80 100

● Up to £300,000 ● £300,000 – £400,000 ● £400,000 – £500,000 ● £500,000 – £600,000 ● Over £600,000

Source: Land Registry

06 2017

Demand from these buyers is in Hertfordshire like St Albans, strongly linked to employment and Harpenden, centres; locations with major with first time buyers struggling FAST FACTS employers in the local economy or to get on the property ladder due fast links into London or Cambridge to high prices and challenging are the most popular. deposit requirements. However, these areas have Rental Demand and seen the lowest take up from the Investment Potential Help to Buy equity loan scheme, Investors make up a small proportion with only 81 sales (7% of all new of the market, amounting to only 13% build sales) supported by Help to 10% of new build purchasers over the past Buy in St Albans since April 2013. three years. Apartments have been the This is mainly because prices New home sales as dominant type of development in the in these areas are still unaffordable a proportion of all major urban centres, accounting for to the majority of first time buyers, transactions in 2016 57% of new build sales in Watford and even when using the scheme. Rickmansworth, and 77% in Bishops Instead, they have been turning Stortford in 2016. to cheaper locations. Buy-to-let investors make up a In Dacorum, 39% of new build higher proportion of the market sales since April 2013 have been here relative to locations further supported by Help to Buy Equity away from London, looking to take Loan. There have also been high advantage of robust rental growth and numbers of Help to Buy sales in higher yields. East Hertfordshire and Welwyn 31% We are forecasting a 19% increase Hatfield. n of buyers are aged in mainstream rents across the UK between 30-49 over the next five years. Rents in the Outer Commute zone, which FIGURE 5 includes places such as Stevenage Help to Buy and Garden City, have assisted sales grown by 8.4% in the past five years, with demand particularly strong for 1 Help to Buy and 2 bed properties. Local Authority Sales since April 2013 Downsizers and Retirement Living 20% The new build market in Dacorum 479 of buyers are moving Hertfordshire has also seen strong from London demand from downsizers. 29% of Savills new build buyers cited East Hertfordshire 283 downsizing as their reason for moving, compared to 13% of those 203 buying in the second hand market. This suggests that new build homes, particularly those designed with North Hertfordshire 166 downsizers in mind, are providing a product that cannot be found in the 29% existing housing stock. Stevenage 165 are moving in order The retirement housing market has traditionally focused on ‘needs’ to downsize based demand. However, over Watford 129 the last few years we have seen the emergence of an aspirational downsizer market. House buyers Hertsmere 124 in this market are typically aged in their mid to late 60s, and seeking to unlock housing equity or move to Broxbourne 106 a smaller, more manageable home, that still has spacious rooms and 1,816 St Albans 81 plenty of storage space. sales have been supported by Help to Buy Help to Buy and First Time Buyers Three Rivers 80 Help to Buy would appear to be tailor-made for many locations Source: DCLG

savills.co.uk/research 07 Spotlight | Hertfordshire Residential Development

OUTLOOK

■ to Outperform London: market, demand for land in Hertfordshire ■ Planning for Growth: In November 2016, we forecast that the is anticipated to remain high. Hertfordshire should be building East of England would be the strongest almost 6,000 homes per year, but has performing region over the next ve Housebuilders are predominantly seeking delivered only half that number for the years, with house price growth of 19%. immediate land with capacity for 100- past ve years. Failure to deliver enough In Hertfordshire, this will be driven by a 150 units without large remediation or homes to meet need will exacerbate strong local economy and buyers moving infrastructure costs. In the longer term, affordability pressures and hinder wider out of London in search of better value there is always demand for well-located economic growth. for money. strategic sites, and registered providers are increasingly entering this market. Local authorities have a crucial role to However, the strong recent rise in play in bringing forward more land by values in parts of Hertfordshire means ■ Infrastructure Driving Growth: identifying sites through the Local Plan that buyers are becoming increasingly Major infrastructure projects will act process. Given the high levels of planning stretched. Future house price growth will as a catalyst for development across the constrained land in Hertfordshire, it is be strongest in the lower value areas. county, from Crossrail 2 in the east to the essential that all local authorities produce Metropolitan Line extension in Watford. up to date Local Plans, providing a ■ Continued Demand for Land: Motorway upgrades could also release strategy for sustainable development that Given the strength of the residential strategic sites in the north of the county. will meet the county’s need.

Savills team Please contact us for more information Please contact us for more information

Emily Williams Justin Bates Abigail Jones Residential Research Development Development 020 7016 3896 0122 334 7266 0122 334 7094 [email protected] [email protected] [email protected]

Daniel Plumb Jonathan Dixon James Rennie Residential Development Sales Planning Urban Design 0127 975 6807 0122 3347069 0122 334 7260 [email protected] [email protected] [email protected]

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