Development – 2018/2019

SPOTLIGHT Bedfordshire: Research Unlocking potential

Housing market Development opportunities Infrastructure upgrades Market Overview Market Overview

Underdeveloped, affordable Housing market Figure 2 Average transaction values, year to August 2018 Bedfordshire’s housing market has seen a and with a strong outlook strong recovery since the global financial crisis, with prices now 39% above their Bedfordshire sits in the centre of one of the UK’s most exciting growth previous 2008 peak according to Land opportunities that will deliver innovation, infrastructure and sustainable Registry data. It has outperformed both the economic and housing growth East of England region and the wider country over this time frame, driven by healthy local Bedfordshire is a county with diverse be a key part of this and continue to improve economic activity and excellent connectivity, characteristics. It ranges from small, rurally connectivity in the region along with the particularly to London. Despite this, much of Sectoral Bedford set commuter towns, such as Sandy, to the expansion of Luton airport. strengths Bedfordshire still looks relatively affordable, much more urban and densely populated The strength of the location has been with house prices and house price to earnings Luton. What is consistent across the county recognised by a number of high-growth ratios in Luton and Bedford lower than the is relative housing affordability and excellent global businesses that operate in the area and regional average. strategic location. are thriving. The three unitary authorities Luton is the most affordable of the main Bedfordshire’s strength as a location is that make up the county, Bedford, Central population centres, with a median house multifaceted. It has excellent links to London, Bedfordshire and Luton, have all developed price to median earnings ratio at 7.5, below with journey times into Kings Cross St their own significant local sector strengths. the England average of 7.8 and 9.7 in the East Pancras as quick as 24 minutes from Luton Employers are also attracted by of England. It has an average house price of and less than 50 minutes from most other Bedfordshire’s positive demographic picture. £239,800 compared to a national average towns in the county. It has seen population growth of 8.0% since Bedford of £294,700. A location with this level of Central Bedfordshire It is situated in a central area in the heart of 2011, significantly outperforming the national Aerospace, Electronic affordability is rare given its strong and the Cambridge-Milton Keynes-Oxford growth rate of 4.35% (ONS) and it has a strong local Engineering, Creative improving connectivity to London and other corridor, which is one of the most innovative labour pool with high levels of employment. Industries, Food key locations. and economically successful parts of the Bedfordshire’s outlook is also strong, with Central Bedfordshire is the least affordable & Drink, Research Average transaction UK. The corridor has huge opportunities for base-case population and employment growth of the three authorities, having seen values (year to & Development, further growth and the support of central projected to be higher than both national and affordability decline the most during the August 2018) Manufacturing government. Improved infrastructure will regional projections. recovery period. Its house price to earnings ■ Below £200,000 Luton ratio is now 10.4, compared to 7.4 in 2008. ■ £200,000 - £300,000 ■ £300,000 - £400,000 Figure 1 Population growth rate With an average house price of £332,500 it ■ £400,000 - £500,000 Bedfordshire England and Wales East of England is the only authority in Bedfordshire higher 125 ■ Over £500,000 than the East of England which has an average house price at £329,500. However, it remains a significantly more affordable location Source Land Registry, OS 120 Central than the neighbouring local authorities of homes in the authority are than the East of England average Bedfordshire Aylesbury Vale and South Cambridgeshire, relatively affordable within the but higher than the national average. 115 High Performance which both have house price to earnings ratios wider market context. Of the main towns, Leighton Buzzard of over 11. Bedford’s affordability is in and Dunstable have experienced the Technologies, Research High values in Central Bedfordshire’s between that of Central Bedfordshire most house price growth since the & Development, Visitor 110 villages and towns such as Sandy and and Luton, with a house price to previous peak, both seeing a 44% Economy, Transport Biggleswade contribute to its house price earnings ratio of 9.3. Average house increase, with Luton at 40% and & Logistics, Agrifood to earnings ratio. Nevertheless new prices are £303,300, which is lower Bedford lagging slightly at 35%. 105

Population growth (2007-2027, 2007 base) 2007 (2007-2027, growth Population Figure 3 House prices vs 2008 peak 100 Bedford Luton Central Bedfordshire 2011 2021 2017 2012 2015 2013 2018 2016 2019 50% 2014 2010 2027 2022 2025 2023 2024 2026 2007 2020 2008 2009 40% Source Oxford Economics 30% 20% In many ways the picture is very positive and there is 10% Luton certainly a wealth of opportunity for future growth. 0% Air Transport, Creative -10% The county does, however, face challenges. The ability to Industries, Business -20% deliver on its growth potential will require the provision Services, Logistics, Vans -30%

of a substantial amount of new housing, in addition to 2008 peak change since Price Jul-2011 Jul-2012 Jul-2013 Jul-2015 Jan-2011 Jul-2014 Jul-2010 Jul-2017 Jul-2016 Jul-2018 Jan-2013 Jan-2014 Jan-2012 Jan-2015 Jul-2008 Jul-2009 Jan-2010 Jan-2016 Jan-2017 what is currently planned Jan-2018 Jan-2008 Jan-2009

Source Land Registry

2 3 Market Overview Development Land

Housing delivery Figure 4 Housing delivery against existing plan targets Housebuilding exceeded adopted local plan targets in 2017/18 in all Luton Development the local authorities in Bedfordshire, ■ Luton UA Local Plan Target OAN 1,000 Figure 5 Residential Development Pipeline although Luton delivered far less land and than its Objectively Assessed 900 Number of Housing Need. It has struggled to residential units 800 bring brownfield sites forward, as planning 2,000 a result of viability challenges. Its 700 4,000 6,000 tight urban boundaries and lack of 600 A step change is required greenfield alternatives within the to meet Government's ● Draft Allocation 500 ● Allocation authority mean that more needs to growth ambitions ● Outline Permission be done to bring forward brownfield 400 ● Permission ● Under opportunities as part of the solution. Number of homes The Government has identified a ‘once in a 300 ■ Green Belt Currently, Luton is the only one generation opportunity’ to unlock major new 200 of the three authorities without a development and economic growth in the Bedford Housing Infrastructure Fund bid, 100 Cambridge-Milton Keynes-Oxford corridor a mechanism which could help to through infrastructure investment. 0 unlock brownfield sites. 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 The National Infrastructure Commission Inevitably, Luton is reliant on recommended in its 2016 report that strategic neighbouring authorities to pick up Bedford (pre NPPF plan) infrastructure investment needs to be the housing delivery shortfall under ■ Bedford UA Local Plan Target OAN married with locally led housing growth the Duty to Cooperate. The majority 1,400 ambitions to ensure the area does not Milton Keynes of this lies with Central Bedfordshire fall behind its international competitors. and North Hertfordshire where there 1,200 Central government and Homes England are has been Green Belt release. proactively looking to engage on how this can 1,000 Looking forward, there is a be delivered through a range of measures, significant central government desire including new and expanded settlements. for local authorities in the Cambridge- 800 They have identified the requirement for Milton Keynes-Oxford corridor infrastructure investment beyond the current 600 to submit ‘ambitious proposals pipeline and designated the corridor a key Stevenage for further growth’, as part of the Number of homes economic priority. Notably there is up to Luton 400 Government ambition of seeing one £4.1bn available for forward funding housing million homes built in the corridor by infrastructure nationally. 2050, to realise its growth potential. 200 The potential difference in economic growth Across the corridor, delivery outcomes from more significant and ambitious 0 will need to increase by 63% against 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 intervention and investment compared to the the level achieved in 2017/18 for its baseline case is enormous (Figure 6). Source Savills Development Database growth potential to be unlocked Central Bedfordshire (pre NPPF plan) Figure 6 Unlocking the growth potential across the corridor by different levels of intervention and Bedfordshire has the land, the ■ Central Bedfordshire UA Local Plan Target OAN affordability, the economic base and 2,000 Scenarios Job Growth Economic Impact significant new transport investment 1,800 to play a key role in filling that gap. Business as usual +1.9% 1Existing levels of housing delivery, current and +335k Central and local government 1,600 confirmed infrastructure investment only. pa GVA need to reach a place where they 1,400 see mutual interest in delivering on Incremental enhancements 1,200 this ambition. 2The housing requirements identified in SMHAs are met. An increase in population is realised in line +2.4% 1,000 with the ONS high migration projection. Transport +720k infrastructure investments are made above and beyond pa GVA 800 the existing plans. Several existing constraints to

Number of homes economic growth are relieved. 600 63% 400 Transformational enhancements Across the corridor, 3Housing investment is such that population grows delivery needs to increase well above the ONS high migration scenario. A high +2.9% 200 +1.104m by 63% against the level level of transport investment is realised, allowing an pa GVA increase in economic integration. This scenario is achieved in 2017/18 0 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 required to realise the growth potential of the corridor.

Source MHCLG, Savills Planning database Source Cambridge Econometrics 4 5 Development Land Development Land

1 million jobs 1 million homes Unlocking the growth potential across the corridor The proposed infrastructure improvements will support plans for could deliver over one million extra jobs the construction of one million new homes in the corridor by 2050

Figure 8 Major infrastructure improvements Alongside this, the Government has stated methodology for calculating housing need its interest in exploring bespoke mechanisms figure of 1,417 homes. The emerging Central of Land Value Capture. This includes working Bedfordshire target slightly exceeds the with local authorities in the corridor, subject standard methodology number, but the to ensuring these mechanisms do not impact objectively assessed need figure being used on the viability of development in an area. to inform the emerging local plan in Bedford There has been significant investment to is 950 homes per year, 30% below the Northampton date with plans for further transformational standard methodology figure. improvement, including London Luton But meeting the Government’s ambition of Cambridge Airport’s £110 million expansion, the East- delivering one million new homes across the West Rail link, and the Oxford-Cambridge corridor by 2050 will require local authorities Expressway – which recently saw the preferred to go beyond the baseline of the standard route west of Milton Keynes announced. methodology. The target is 33% above the Bedford The provision of new infrastructure will level that would be achieved by applying the open up new potential development sites for standard methodology over the same period. both residential and commercial uses. The However, local development framework greatest opportunities are likely to be where timetables are such that local plans may new infrastructure intersects existing rail take another four years to begin to properly and road, creating new hubs. Bedfordshire reflect the scale of the opportunities. sits at the centre of this opportunity, with the To fully maximise the potential of Milton Keynes new east-west links crossing the Midlands Bedfordshire, there is a need for ambitious Main Line and the M1 in the county. planning policy. While all of the three local However, realising this potential authorities can currently demonstrate will require more proactive, locally led a five year housing land supply, to planning. The emerging local plans in capture maximum value from the new Central Bedfordshire and Bedford have infrastructure, more sites will need to be not fully taken into account the proposed allocated for development. Railway station ■ GreenBelt infrastructure improvements, while Luton’s Closer co-operation, including developing Stevenage local plan was adopted in 2017, before many a strategic plan via a similar housing deal to Luton Infrastructure Labels of the infrastructure plans were confirmed. the one recently agreed for Oxfordshire could A14 Improvements A428 Area Consequently, current local plans provide also be appropriate. Local plans will also need M1 J13-19 Smart Motorway for a lower level of housing than is needed to to identify the differing types of housing need Midlands Mainline maximise the area’s economic potential. The in their areas to support the diversification East West Rail Route (confirmed) ■ Oxford to Cambridge Expressway adopted housing target in Luton of 425 new of product needed to deliver at the scale ■ East West Rail Route (proposed) homes per year is well below the new standard required to unlock the area’s full potential. Source Highways England, DfT, NIC

Figure 7 Local Plan Status Midland Main Line Upgrade growth in both urban areas along with key successful East West Rail Route Central The Midland Main Line improvements and productive areas along the route. The Expressway This rail line will connect areas of East Anglia with Luton Bedford Bedfordshire will include longer platforms, station will be a key element supporting the construction of other parts of Central, Southern and Western England. upgrades and more seats on trains one million new homes by 2050. The Western Section, due to open in 2024, is fully defined with planned stops at both Bedford and Post NPPF Local Luton Local Plan Draft Local Plan Draft Local Plan which will increase capacity along

Plan Status Adopted November 2017 Published June 2018 Published January 2018 the line. The improvements will also A428 Junction Improvements Ridgmont stations. provide for more freight journeys, By the end of 2020, works are due to commence on The Central Section of the project involves connecting Post NPPF Local reducing the level of freight traffic the A428 between Black Cat and Caxton Gibbet. The Bedford with Cambridge. While still at early stages Plan Target 425 homes 1,968 homes N/A key aim of the scheme is to increase road capacity of development, the preferred route is due for (emerging, upper end) on local roads. Full upgrades, per annum including the line electrification and reduce major congestion experienced in peak announcement in 2019. The Secretary of State has Objectively north of Bedford towards Kettering periods. The road improvements will also help support requested accelerated plans that will see trains operating Assessed Need 890 homes 1,600 homes 970 homes and Corby, are due for completion growth identified by local plans in the area. on the railway by the “mid 2020s”. per annum December 2019. MHCLG Standard M1 Smart Motorway (Junction 13–19) A14 Improvements Methodology 1,417 homes 2,553 homes 1,281 homes ■ Oxford to Cambridge The M1 will become a smart Motorway between £1.5bn has been invested to provide a new bypass in per annum Expressway Junctions 13-19 by 2020. Smart motorways use the area to the south of Huntingdon, as well as providing The Expressway will provide a new, traffic monitoring technology to regulate traffic upgrades along the road between Huntingdon and Most recent land high-capacity road link between flow and improve journey times. Cambridge. Work began on the scheme in late 2016 and supply statement 7.47 years 5.81 years 5.80 years Oxford and Cambridge, supporting completion is due in 2020. Source Savills Research 6 7 Residential Development Residential Development

New home sales accounted 58% of all new build for 19.3% of all transactions properties sold with the in Bedfordshire in 2018 assistance of Help to Buy

What next for Figure 9 New build sales, year to August 2018 Help to Buy and new homes? First Time Buyers Getting to work Help to Buy has been used extensively in Commuting patterns in Bedfordshire demonstrate the Bedfordshire, with Central Bedfordshire importance of good links to employment centres for Transaction levels in the new home buyers in the county. Over a third of the population and Bedford in the top five unitary homes market remain strong in employment work outside the county. 8.1% commute authorities in the country for total Help to to London, but Milton Keynes, Stevenage and St Albans New home sales accounted for 19.3% of all Buy Equity Loans since the inception of the also attract significant numbers of workers. residential transactions in Bedfordshire in the year scheme until June 2018. to August 2018, according to Land Registry data. Overall in the year to June 2018, 58% Across all commuters, car is the dominant method of This is notably higher than the national figure of of all new build properties sold with travelling to work. However, rail links are more important 11%. 51% of new build flats are sold for between the assistance of the scheme. Central for those working outside of the county; 16.7% of those commuting beyond Bedfordshire use trains, compared £170,000 and £250,000, below the 5% stamp duty Bedfordshire saw the highest volume at to 6.3% of all workers in the county. threshold. New build houses have a broader price 654, over seven times the amount seen in range, but there is a clustering of transactions Luton, which recorded just 90. Employment locations of between £300,000-£360,000. Transaction activity The statistics underscore the importance Bedfordshire residents in new houses is strong right up to the £600,000 of Help to Buy to the new build market in Help to Buy limit before tailing off. Bedfordshire as a whole. After the scheme Transaction volumes in Bedfordshire have been comes to an end, developers will need to consistent over the last three years. 2017 saw a fall to deliver more diversity of product type and 11,107 total transactions, down from 11,477 the year a range of tenures to ensure the current before. Volumes so far this year look very healthy, level of housebuilding can be maintained. with the figure running at 9,968 to August 2018. More positively, the introduction of Number of sales As Figure 9 shows, Luton sees the most activity 20 the price cap on Help to Buy properties 64.8% 23.1% 8.1% and also accounts for the majority of the lower 40 announced in the Autumn 2018 Budget is Work in Commute to locations Commute value transactions, with central Bedford and 60 unlikely to have any significant impact as Bedfordshire in the Oxford-Milton to London Keynes-Cambridge 80 Dunstable also seeing robust activity. Higher value the cap for the East of England will be corridor sales are less clustered with some concentrations in Average transaction £407,200. This is significantly higher than value Travel to work method the greenbelt areas in Central Bedfordshire. ● Up to £300,000 the average new build transaction value in A significant proportion of buyers are moving ● £300,000 - £400,000 Bedfordshire of £288,600. Even in Central out from London and Milton Keynes. Demand from ● £400,000 - £500,000 Bedfordshire the average is £346,100, ● £500,000 - £600,000 these buyers is strongly linked to employment ● Over £600,000 which is pulled up by some higher value centres; locations with fast links into London and sales above the Help to Buy price limit Milton Keynes being the most popular. Source Land Registry, OS and therefore not eligible for the scheme. After 2023, the scheme will also be Figure 10 Distribution of sales in Bedfordshire, year to August 2018 restricted to first time buyers. Since 73.5% 6.3% the scheme was launched, a substantial ■ New houses ■ Old houses ■ New flats ■ Old flats Travel to work Travel to work 600 minority of those who have used it in by car by rail Bedfordshire, 35%, were home movers 500 rather than first time buyers. Source 2011 census Figure 11 Help to Buy Assisted Sales 400 Help to Buy as a proportion Help to Buy Sales Local Authority of all new build transactions 300 April 2013 – June 2018 April 2013 - June 2018

200

Number of Sales Bedford 2,197 62%

100 Central Bedfordshire 2,596 48% 0 £50 £90 £170 £210 £130 £410 £370 £750 £250 £330 £290 £950 £560 £450 £490 £640 £1,250 £1,600 £1,900 £5,000 Luton 311 37% House prices (£000s)

Source Land Registry Source MHCLG, Land Registry 8 9 Residential Development Commercial

Percentage of Luton population live in private rental By 2022, online retailing is accommodation, compared to forecast to account for 19% 18% for England & Wales of the total retail sector Industrial sector remains strong

PRS in Luton and beyond The census household data suggests Both these authorities have a higher The industrial sector within Bedfordshire, Consequently, due to all available units Luton has experienced huge growth in that there is demand for both multi- proportion of their population who Cambridgeshire, Hertfordshire and being below 300,000 sq ft there may be the proportion of its residents living family units (apartments and flats) are young couples in their first homes Peterborough remains strong due to more opportunity to satisfy larger occupier in the private rented sector between and single family units (houses) starting families than the regional and increased occupier demand which has requirements within the region. 2001 and 2011, increasing by 95%. This because there is substantial demand national average according to Acorn recently spiralled due to structural change Considering the current supply level, which compares to Bedford at 55%, Central from families with children and demographic segmentation. within the logistics and retail sectors. stands at 487,183 sq ft and the five-year Bedfordshire at 68% and a regional younger households. This suggests there could be a role for Take-up in the regions for units of over average annual take-up, there is 0.27 years average of 61%. Despite the compelling demand side a suburban PRS model in these locations 100,000 sq ft has totalled 4,161,558 sq ft so left of supply within the regions, highlighting At the time of the 2011 census evidence, Luton has seen lacklustre like we have seen in Faygate, three miles far in 2018. Interestingly, 86% of take-up was further opportunities for development. Luton had 24% of its population living rental growth over the last two years at west of Crawley town centre where M&G based in Bedfordshire alone, compared with There are currently four units totalling in private rental accommodation, 0.3% for median asking rents. This can and Crest Nicholson have teamed up 3% in Peterborough, 0% in Cambridgeshire 947,000 sq ft being speculatively developed compared to 18% for England & Wales. be explained to some extent by sluggish to fund, build and let 227 new private and 11% in Hertfordshire, highlighting throughout the regions, which will helps Since 2011, this trend has likely become earnings growth which has affected the rented sector PRS homes. Bedfordshire as an occupier favourite. In fact, alleviate some of the supply shortage. more pronounced. whole country. To date there is only one Build to take-up within the regions has historically The largest of which is Bedford 405, in Over 60% of households are Looking beyond Luton, Central Rent scheme in Bedfordshire, in Bedford been robust with the five-year annual average Bedfordshire, totalling 405,000 sq ft. 82.2% private renters in Luton town centre. Bedfordshire and Bedford have seen itself. Looking ahead, with large sites resting at 1,784,874 sq ft per year. of the sq ft under construction is located To the north and south of the centre, a more positive rental growth story, coming forward, the role of Build to Rent By 2022 online retailing is forecast to within the Bedfordshire market, highlighting over 40% of households rent. This showing growth over the same time in speeding up delivery and making the account for 19% of the total retail sector. strong developer confidence. shows how well established the private frame of 4.7% and 1.9% respectively. new build market accessible to a greater According to research undertaken by Additionally, there are currently 22 sites rented sector is in Luton and where this Both have seen the highest increase for number of people, seems particularly Prologis, an extra €1 billion spent online leads throughout the regions allocated for future demand is concentrated. 0ne-bed and three-bed units. relevant in Bedfordshire. to an additional 770,000 sq ft of requirement development, of which only six have been for warehouse space, suggesting the appetite identified as developable in short term, for industrial accommodation will only suggesting more sites could be brought Figure 12 Proportion of population in Private Rented Sector continue to increase. forward particularly as building sizes increase. Proportion of As a consequence of strong levels of Furthermore, the conditions that the market Bedford households in PRS take-up, the region is experiencing a current is currently experiencing with an inherent supply shortage with less than 500,000 sq lack of supply and increased occupational ■ Under10% ■ 10% - 20% ft available across three units. These units demand has pushed on rents. Taking data ■ 20% - 30% include Huntingdon 252 in Cambridgeshire from forecasting house RealFor, we expect ■ 30% - 40% totalling 251,746 sq ft, Orton 130 in industrial rental growth across the region ■ 40% - 50% Peterborough totalling 129,099 sq ft and of at least 12% by 2022, reaching 14.3% in ■ 50% - 60% North Herfortfordshire Building 2 G Park in Bedfordshire totalling Bedford and as high as 20% in Cambridge ■ Over 60% 106,338 sq ft. and surrounds.

Figure 13 Warehouse take-up by region ■ Bedfordshire ■ Hertfordshire ■ Peterborough ■ Cambridgeshire 4,000,000

Luton 3,500,000

3,000,000

2,500,000

Central Bedfordshire 2,000,000 Sq Ft

1,500,000

1,000,000

500,000

Dacorum St Albans 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source 2011 census Source Savills Research

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