Does a super-prime 'bat shed' lie at the heart of the UK's planning woes?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Of all the super-prime homes in Buckinghamshire, the nicest might soon belong to a colony of Bechstein's bats.
The £100 million, 1km-long so-called "bat shed" is intended to protect the rare species of vesper bat from HS2 trains running between London and Birmingham. It represents just one of 8,276 consents required from various public bodies that have dogged the HS2 project since it was approved by the government twelve years ago.
Is the bat shed and projects like it standing in the way of the new UK government building 1.5 million homes over the course of this parliament? Perhaps. Writing in the Times this morning, prime minister Keir Starmer took aim at the UK's "increasingly ruinous" planning system. The PM has instructed ministers to plan laws that would streamline complex environmental rules that can add millions of pounds to the cost of a development - he called the bat shed an "absurd spectacle", adding that "this government will not accept this nonsense any more."
Diplomacy
I jest, but this is no joke for the house builders. Back in August, the Home Builders Federation estimated that nutrient neutrality rules were preventing the construction of more 160,000 homes across 74 Local Planning Authorities.
This stuff is particularly ruinous for mega-projects like HS2, which the UK appears particularly bad at completing on time and in-budget. I've written before about a 2016 PWC study of 20 European high speed rail networks. Many of our continental peers manage to deliver lines at an average cost of £32 million per kilometer, compared to HS2's incredible £200m-per-km bill.
This is not to say that we shouldn't take care of Bechstein bats, but the consent process needs a rethink. Ricardo Ferreras, construction director of Spanish infrastructure specialist Ferrovial, was very diplomatic when in 2022 he described the quirks of delivering rail lines in the UK:
“It is about the number of resources that we use here in the UK that are linked with planning; the environmental matters, the stakeholder engagement, all the consents that are needed... as an example in Spain the government will get all consents, and all environmental permits, and then when they award the contract to a contractor, the contractor can just focus on delivering the project...I am not saying it is worse [in the UK] but it is different and it takes much more man power and obviously that increases the cost of the project."
Borrowing costs
Policy is unquestionably weighing on housebuilding, but the murky outlook for borrowing costs is mostly to blame. The latest Construction PMI from S&P Global, out yesterday, revealed a sharp drop in housing output in November. That's the second consecutive decline and the fastest rate of contraction since June.
"Construction companies once again noted that elevated borrowing costs and fragile consumer confidence had an adverse impact on demand conditions," the release noted.
Official figures published earlier in the week also demonstrated how much work the government faces if it is to incentivise developers to meet its ambitious targets. Housing starts data for the first half of 2024 from Homes England did show a marginal rise compared to the previous year, but if that's maintained through the second half then total starts will slump to a nine-year low, writes Anna Ward.
House prices
UK house prices climbed 1.3% in November, the five consecutive rise and the fastest rate of growth so far this year. That pushes the annual rate of growth to 4.8%.
This might seem strange, given comments from construction companies in the previous section, but consumers have so far been much more sanguine about the budget - see Monday's note. Will this be sustained? It's unlikely, Knight Frank's Tom Bill tells Bloomberg:
The impact of the budget “is still in the post for the UK housing market. An increase in borrowing costs and the disappearance of sub-4% mortgages in recent weeks means we expect downwards pressure on house prices to intensify next year.”
Soaring demand
UK students are struggling to find housing and demand for accommodation is soaring. Supply is failing to keep up, and rents are up around 8% this year, according to the latest Knight Frank data.
So what's going on? How can universities, developers, and investors collaborate more effectively to tackle the supply crunch? What emerging trends will shape the future of student housing in 2025 and beyond? From the race for high-quality accommodations to the evolving expectations of Gen Z students—this conversation is a must-listen for anyone navigating the student property market.
Anna Ward attempts to answer these questions in a new edition of Intelligence Talks. She is joined by Neil Armstrong and Merelina Sykes, joint heads of Knight Frank’s student property division, along with research associate Katie O’Neill. Listen here, or wherever you get your podcasts.
In other news...
With a general election behind us, a Budget that did not explicitly target wealth and clarity around property taxes, super-prime demand is expected to strengthen next year. Tom Bill has the details.
Elsewhere - M&S can tear down flagship Marble Arch store, says UK government (Reuters).