Knight Frank South East residential development review 2009
20 July 2009
A shortage of new build housing will emerge in the South East of England next year, according to the latest Knight Frank residential development review.
New build starts in the region this year are likely to amount to the lowest since the 1950s. When combined with the lack of supply in the second-hard market – caused by the number of potential vendors opting to ‘wait out’ the recession – this could lead to a real shortage of properties for sale next year.
Jon Neale, head of development research at Knight Frank, said: “Developers who opt to move now may be in the position of being able to sell into an undersupplied market next year. However, they need to be very cautious, opting to deliver in-demand family housing into those areas with resilient housing markets. Elsewhere, a greater number of forced sales could undermine this strategy.”
Hugo Stuttaford, south east residential development, Knight Frank, added: “'Over recent weeks, we have noticed growing interest from residential developers and housebuilders in the well located land opportunities which have scope for well designed development. This is in complete contrast to the last quarter of 2008 where there seemed to be little appetite for any form of speculative land acquisition. Whilst these buyers remain a relatively small group (i.e. those with access to cash or private equity), these parties are beginning to compete aggressively when the right opportunity arises - particularly where the sale may be distressed and offer good value. It may be that we are seeing the first stages of a recovery in the land market but for the best sites only - the less desirable opportunities are still likely to struggle to find buyers.''
The new south east research also points out that many developers in the region are shifting their business strategies away from high-density flats to traditional family housing. However, the South East Plan, which calls for an additional 654,000 homes in the region by 2026, does suggest that many of these new dwellings can be accommodated in regeneration sites within existing urban areas.
Neale added: “The final version of the South East Plan suggests that there is scope for substantial high-density development within many of the region’s existing towns. This may well be the case – but it is unclear who will build these schemes in the near future.
“Housebuilders and other residential developers are becoming more acquisitive but they are focussing on sites suitable for lower density family housing. Regeneration sites or those with consent for flats attract little interest. Furthermore, funders themselves are happier to lend against traditional family housing, both for end buyers and developers. It is difficult to see this situation changing in the near future.”
The report suggests that, given the current constraints in the market, it will be difficult for the required delivery levels to be achieved unless new models are found for regeneration schemes or more Greenfield land is released for development.
However, it adds that a number of barriers to development are being challenged in the region. Reviews of green belt are likely to take place around some major settlements, and the publication of the delivery framework for the Thames Basin Heaths means that new homes can now be built in closer proximity to this important wildlife area.