2023-11-29-莱坊-South_East_Residential_Development_Review_2023_6页_8mb

South East Residential Development Review Summary

Overview

Knight Frank's 2023 review of the South East residential market highlights a significant slowdown in housing development amid economic and planning challenges. The region has experienced a decline in housing delivery, with a 16% drop in Energy Performance Certificates granted to new homes in 2023 compared to 2022. This contrasts with stronger economic growth, attracting high earners from London and supporting demand for new housing. Supply constraints due to planning obstacles and environmental regulations are expected to persist.

Key Challenges

• Development Slowdown: Housing delivery decreased by 16% in 2023, driven by reduced demand from rising mortgage costs and halted local plans. The South East is affected by a 21% fall in planning permissions in the second quarter of 2023, the lowest since 2016.
• Planning Issues: Nutrient and water neutrality rules impede development, citing delays for 30% of affected councils in the region. Over twenty councils have paused local plans, representing nearly 40% of national affected councils.
• Affordability: The house price to earnings ratio in the South East is 10.75, significantly higher than the national average of 8.1. Transaction volumes have dropped below 10,000 monthly, indicating market sensitivity.
• Supply Shortfall: New homes delivered fall short of demand, with a projected shortfall of around 7,860 homes annually. Land values are high but building costs remain a barrier.

Key Opportunities

• Economic Growth: The South East is poised for strong economic recovery, driven by sectors like life sciences, professional services, and sciences/technology. Life sciences contribute over £94 billion and employ nearly half a million people.
• Migration and Demand: Increased long-distance commuting from London has grown, with Londoners moving to the region rising by 22% since 2019. The population is expected to grow by 3% by 2033, outpacing UK average growth.

Future Outlook

• Short-Term: House prices may decline by approximately 11% over the next two years due to higher mortgage rates, reducing sales to first-time buyers. Affordability pressures are expected to intensify.
• Long-Term: Persistent supply constraints will continue, potentially leading to ground rent scenarios. Strategic sites and high-growth sectors will remain key drivers, while resolution of planning policies could alleviate some pressures. The House of Lords' rejection of scrapping pollution rules offers potential relief.