The government pivots to urban housebuilding
Making sense of the latest trends in property and economics from around the globe
5 minutes to read
A planning "super-squad"
The government will today announce a series of planning reforms aimed at boosting housebuilding in inner cities, according to an FT report published yesterday.
The proposals will make it easier to convert shops, agricultural buildings and disused warehouses into homes, and there will be cuts to red tape governing home extensions and loft conversions. The announcement will also include £24 million in funding and a new "super-squad" of planners and experts charged with clearing delays in big developments that will initially be deployed in Cambridge.
By tilting towards urban construction the government is trying to walk a fine line between meeting ambitious housebuilding pledges while soothing internal conservative party divisions over construction in rural constituencies.
Also out today - a survey of more than 300 councillors undertaken by SEC Newgate and shared with the Times found two thirds thought the housing crisis was getting worse. A similar proportion agreed that housing supply in their local area was “somewhat” or “severely” lacking.
Urban regeneration
Improving planning policy to boost good quality housing development in inner cities makes sense - I recommend this July 12th Telegraph column by Mark Allan and Simon Carter, the respective CEOs of Landsec and British Land, for more on why.
Their piece claimed that too little time had been spent promoting mixed-use development in urban areas relative to the effort spent making housebuilding more palatable to people living in leafy and out of town areas. They cited data from Oxford University professor Ben Ansell showing that there are just 55 parliamentary constituencies in the UK that demonstrate net public support for house building in their local areas, all of which are overwhelmingly urban in nature.
Unfortunately, however, the reforms we've seen so far aren't likely to have a meaningful impact on housing supply, Stuart Baillie, Knight Frank's head of planning says in the original FT report. He added that the changes would not get to the heart of issues facing the UK’s “overburdened and under-resourced planning system”, and would probably create only hundreds of new homes when the country needs thousands.
The senior living shortfall
Senior living data gathered by Oliver Knight offers a glimpse of how properly targeting planning policymaking in urban areas could help address some of the housing market's most pressing problems.
Members of the Baby Boomer generation show an increasing desire to live in urban locations as they age, for example. Data from the 2021 Census shows that more than eight million over-65s already live in urban areas, up from seven million in 2011. In the next 20 years, the over-65 population is forecast to increase by around a third – meaning seniors will make up an even bigger part of our urban communities if the housing is there to support it.
Developers have responded. Some 30% of Integrated Retirement Community (IRC) schemes built in the last two years have been delivered in the most urban settlements, up from just 9% for schemes built before the 1980s. However, the scale of senior living development nationwide continues to fall well short of projected demand.
More than 8,000 new senior homes were built last year across 145 schemes, representing a 6.4% increase on the previous year’s delivery. It takes the total number of complete and operational seniors housing units across the UK to 762,872. Compare that to the Mayhew Review, published at the end of 2022, which recommended that the government adopt a seniors housing target of 50,000 units a year up to 2040 to keep up with demand.
We estimate that the total number of specialist seniors housing units in the UK will grow by 7.5% over the next five years, taking the total size of the sector to just over 820,000 units by 2027.
Asking prices
Better inflation figures published last week had a swift impact on mortgage rates. The average rate on a two-year fixed deal dipped to 6.79% on Thursday, down from 6.81% the previous day, according to Moneyfacts data. The typical five-year rate dipped to 6.31%, from 6.33%.
Hopefully this marks the return of stability in the mortgage market, though we'll need a run of better figures if mortgage rates are to fall meaningfully.
Higher borrowing costs have been steadily eating into people's ability to meet sellers' asking prices. Analysis of Knight Frank UK data by Chris Druce found that offers were accepted at an average of 95.1% of the initial asking price in the first quarter of 2023 and at 95.3% in the second quarter. The ratio is 100% when the asking price has been met. Anything below this indicates downwards pressure on asking prices.
The readings for the first six months of 2023 are the lowest since the second quarter of 2020 when offers were accepted at an average of 92.5% of the initial asking price. That was a period that saw the closure of the property market for eight weeks due to the first national Covid-19 lockdown.
In other news...
M&S goes on the attack over Michael Gove's decision to block its Oxford Street redevelopment. We unpicked the nuances of retrofit or rebuild in our recent Intelligence Talks podcast. You can listen here.
May 2023 saw an electoral victory for the Partido Popular (People’s Party or PP) across the Balearics Islands. The victory means a cap on overseas buyers purchasing second homes now looks unlikely - Kate Everett-Allen takes a deeper dive.
UK consumers defy high inflation and shop more in June. Stephen Springham considers why retail sales continue to outperform the wider economy.
Investors have been lining up to buy into nature-based solutions for quite some time, but the government only launched its Nature Markets Framework in March and is still working on the rollout of its environmental land management schemes. For the Rural Report 2023, Andrew Shirley quizzes green finance minister Lord Benyon on the government’s evolving plans for nature-based markets.
Elsewhere - Federal Reserve to signal it is not done yet as it raises interest rates again (FT), Scotland and Northern Ireland buck the fall in UK’s European Union exports (Times), and finally, is the UK economy still a global inflation outlier? (FT).
Photo by Akash Banerjee on Unsplash