The latest analysis by residential property market analysts, Hometrack, reveals that the North East of England has the greatest concentration of new build properties in the UK. With new build defined as the number of private housing starts in the last 12 months, the North East leads the way with 14% of total housing transactions over the last 12 months classified as new build followed by London (13.9%) and East Midlands (12.1%).
Each year around 11% of all property transactions nationally are new build, however as Hometrack’s study shows, the distribution of development is not uniform across the UK (see figure 1). In recent years the introduction of Help to Buy, growth in LCHO, and the emergence of build-to-rent has meant some local housing markets are more new build driven than others.
Currently the North East is also delivering good return on investment for housebuilders. The region has outperformed its long run average (see figure 2) which could help to explain the increased supply of new builds over the last 12 months. It has registered a 2.4% increase on the 5-year CAGR of 1.9% largely because the market is less mature in its recovery following the financial crisis than elsewhere in the country and there is still headroom for growth as prices rise off a low base.
Alex Rose, Director – Residential Real Estate Solutions at Hometrack says: “The above average level of new build concentration in the North East could indicate that developers are sensing demand for new housing in areas where the economy and in particular housing transactions are slow and in need of resurgence. Help to Buy is being used on a notable proportion of these housing completions in the region as a means of supporting new build volumes.
Rose continues: “In London and the South East, however, house price performance has been strong over the past five years but there has been low single digit growth with small declines in prime London in recent months. In London there has been an increase in the supply of housing within the last 5 years as turnover has grown and developers look to accelerate their ambitions to help meet the government’s target of 300,000 homes per year.
Rose concludes: “With competition amongst providers ever increasing, many housebuilders are beginning to migrate out of the capital and look elsewhere to more profitable locations with less constraints on affordability. When comparing the different regional rates of new build to the UK average of 11% it is noticeable that much of the new private housing delivery is occurring in the East of the country, with only the West Midlands as an exception.”