Savills Research | Residential Winter 2011/12 Spotlight on… Residential Development Sales

Norwich continues to out-perform other East Anglian markets, with greater levels of Summary housebuilding forecast over the coming years An overview of the market

The Norwich residential property During the first three-quarters of n House prices have bounced by 11% since their market has shown signs of 2011 prices have softened across trough in 2009 following the downturn, with values recovering to its former peak, most residential markets and being insulated by the slowdown in new residential following the economic downturn transaction levels have remained flat. units being delivered to the Norwich market. which derailed the market. Residential transactions across the n A reduction in stock levels across Norwich, and Average house prices across whole market are currently renewed investor demand, will entice development Norwich have now recovered by 11% 45% lower than those levels seen back to the market, if funding and viability allow. from their trough in 2009 and today at the 2006-07 peak, although are now within 10% of previous 2007 the market is returning closer to a n The Norwich population is forecast to grow by peak levels, outperforming the East more normal trading environment 10% over the next 10 years which will put pressure on housing stock. This links to our five-year price region and the UK national average, compared to national and regional growth forecast of 14%. which are both 11% from their former levels, which are 50% and 53% from peak values. their respective peaks.

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Graph 1 Residential development across Housing Completions, historic and forecast Norwich is forecast to remain low before increasing back to historic ■ Norwich Housing Trajectory 10 year historic average 10 year forecast average development levels in 2013-14.

1,200 With changing market conditions, the average density of developments 1,000 has also reduced, with a move away from high-density, flatted schemes. This lack of delivery to the market 800 over the past two years has helped insulate new-build residential values 600 and rates of sale across Norwich. A dditional dwellings Reduced development activity has meant the avoidance of an available 400 overhang of stock, as seen in other East Anglian towns such as Ipswich.

200 Aside from Three Score and Bowthorpe, there are no large 0 undeveloped housing allocations within the city boundary according to 2000/012001/022002/032003/042004/052005/062006/072007/082008/092009/102010/112011/122012/132013/142014/152015/162016/172017/182018/192019/202020/212021/222022/232023/242024/25 the latest Annual Monitoring Report. Source: Council Annual Monitoring Reports Consequently, the contribution of the city of Norwich to overall housing Going forward we expect a slow Norwich are still being built out, delivery in the Greater Norwich and steady return to higher levels of but at a slower rate than pre-2008 area is heavily reliant on identifying lending at higher loan-to-value ratios, levels, which has supported housing additional ‘urban capacity’. However, which would likely allow pent-up delivery throughout 2009-10. This is there remains a strong pipeline demand to be released progressively in-line with the national trend which of 2,990 residential units across into the market during a period of has seen house building reduce Norwich, on sites over 10 dwellings, high mortgage affordability. to the lowest levels since 1923. with active planning permission.

House building in the city has continued to decline since the “Residential development across Norwich full extent of the recession and a notable slowdown in housing is forecast to remain low before increasing delivery became apparent. The major back to historic development levels in 2013” allocated residential sites across

Graph 2 Graph 3 Type of Purchaser in Norwich Student Numbers in Norwich ■ Investor ■ Owner occupied ■ Total students International students as a % of total students (RHS)

100% 21,000 17%

18,000 16% 80%

15,000 15%

60% 12,000 14% Students 9,000 13% 40% Percent of R eservations Percent 6,000 12%

20% 3,000 11%

0% 0 10% 2008 2009 2010 2011 (YTD) 1995/96 1996/971997/98 1998/991999/00 2000/012001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 Graph source: Savills Research Graph source: HESA

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Future housing delivery will come Map 1 through large strategic sites surrounding the city, and will look to Average House Prices in Norwich gain planning permission before the implementation of the Community Infrastructure Levy (CIL). New housing strategy Residential developments across Norwich may also benefit from the newly announced (November 2011), £400 million Get Britain Building Fund, which aims to bring forward stalled sites that are shovel- ready with planning permission. A prospectus and invitation for bids are expected before the end of the year (2011), with the stated intention of unlocking development of up to 16,000 homes.

This recent funding initiative was announced alongside a newly proposed Mortgage Indemnity Guarantee Scheme for buyers of new homes, which could also improve rates of sales as first-time buyers Data source: HM Land Registry would be able to continue to access Graph 4 the market when funding for the First Buy equity loan scheme runs out. Employment Growth and Growth Forecasts ■ UK East Norwich Type of buyers 10% During the previous two years there 8% had been a change in purchaser type 6% of new-build property, from buy-to-let 4% investment purchasers (which were 2% a symbol of the boom, high loan- 0% to-value mortgage years), towards -2% equity-rich owner occupiers.

A nnual Change -4% -6% Recent evidence suggests that -8% during 2011 investor demand has 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 returned to Norwich’s residential market, a result of the schemes Graph source: Oxford Economics which are currently marketing, Graph 5 historically low interest rates, and also investors looking to take advantage Population Growth Forecasts of strong rental demand, as first-time n UK n East n Norwich buyers are priced out of the market. 18% According to the findaproperty.com rental index, values in the East of 15% England have risen by 5% annually 12% to the end of September 2011, compared to 4.6% nationally. 9%

Sources of Demand A nnual Change 6% Employment levels across Norwich 3% fell as a result of the recent downturn and suffered three years of negative 0% employment growth. This trend 5 years 10 years 15 years 20 years has now reversed, with Oxford Graph source: Oxford Economics Economics forecasting growth from

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Graph 6 House Price Index, Ten-year Growth – all property OUTLOOK England & Wales East Norfolk

220 Key findings in this document

200 ■ Population is forecast to increase beyond 180 levels that will be seen nationally and regionally, 160 as Norwich remains a high-demand city, as the 140 employment market rebounds stronger than other

120 East Anglian markets.

100

A nnual house price growth ■ A shortage of new-build supply has insulated 80 values across Norwich, with greater levels of house building forecast over the coming years, as Sep 01Jan 02May 02Sep 02Jan 03May 03Sep 03Jan 04May 04Sep 04Jan 05May 05Sep 05Jan 06May 06Sep 06Jan 07May 07Sep 07Jan 08May 08Sep 08Jan 09May 09Sep 09Jan 10May 10Sep 10Jan 11May 11Sep 11 housebuilders concentrate development on higher Graph source: HM Land Registry demand, established residential markets.

2012 of 1.2% per year over the next This rise in student numbers ■ Over the next five years we forecast growth in five-year period. Employment growth is concurrent to the increasing London, the South East and to lead is forecast to increase above the link between the University and the rest of the UK. regional and national figure for the employment within Norwich. ■ The East is forecast to see five year house price equivalent five-year period. growth of 14% between 2012 and 2016, with the The importance of Aviva to the potential for outperformance in higher demand The employment market has strong city is one aspect, but the Norwich markets, such as Norwich and its surrounding high links to the University of , Research Park – set in over 160 demand villages. This outperformance could well which has seen student numbers hectares of parkland on the outskirts add up to an additional 5% to house prices over the increase by 40% over the past of East Anglia’s historic market city, five-year period. decade and by 20% in the past five employing over 11,000 people, years, further increasing housing and with an additional 50 hectares demand. During the same period earmarked by South Norfolk Council the number of international students for further development – is another has also increased by 70% and 50% major positive for the housing respectively. market. ■ table 1 House Price Forecasts “Over the next five years 2012 - 2012 2013 2014 2015 2016 2016 employment across Norwich -1.0% 1.0% 3.5% 4.5% 5.5% 14.1% is forecast to grow by 1.2% East annually, faster than the

-2.0% 0.5% 1.0% 2.0% 4.5% 6.0% national and regional rate of UK growth.” Paul Savitz, Savills Research

Savills Research Residential Development Sales

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This report is for general informative purposes only. It may not be Richard Aldous published, reproduced or quoted in part or in whole, nor may it be used Yolande Barnes Paul Savitz Head of Residential as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure Head of Research Associate Development Sales its accuracy, Savills accepts no liability whatsoever for any direct or 020 7409 8899 020 7016 3835 01603 229 222 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 [email protected] [email protected] [email protected] without written permission from Savills Research.

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