The newly appointed head of land and development for Bradley Hall, Jonathan Rudge, discusses the status of the North East housing market and the region's development sector.
The development sector, and specifically the residential development sector, has never had greater focus in the Government’s policy agenda. In the Housing White Paper Theresa May talked of the need to fix our broken housing market’, addressing the decline in home ownership and committing to a long-term target of delivering 300,000 new homes across the UK.
This target goes far beyond anything proposed before and indeed would see a significant increase on current output across the country. To achieve this, the Government has introduced a raft of new measures that aim to boost supply and support demand.
While there has been much debate as to the pros and cons of these policies, and their application here in the North East, we have seen a significant increase in house building over recent years.
Several new entrants have emerged in the development sector, as well as an increase in both house prices and land values. This activity has not, however, been equally shared across the region. For some locations, such as the urban areas of Tyne and Wear and the attractive market towns along the A1, we have seen development activity close to that seen pre-recession which has encouraged a highly competitive market for new land and property.
Outside of these areas, activity levels drop significantly and there remain locations which have seen little to no new development. In such towns and villages, the viability of new schemes remains challenged and few developers have sought to actively pursue new site. Here, new government policy has had little impact. This polarising market has brought both opportunities and challenges to our client base.
For land owner clients across both public and private sectors, the demand for new development sites has provided one of the few opportunities with which to generate capital to invest in their business or projects. Whether it be a vacant building or underperforming industrial estate, our clients have sought to use changes in the planning system to their advantage and increase value by pursuing a change of use.
For developer clients, the demand for new homes has clearly supported a positive increase in activity, however, new competition has meant that house builders are now having to seek land in new areas. In these instances, the challenge is about understanding the commercial opportunity of new sites, who the likely purchasers of homes will be and what values are achievable. In addition, we have also seen the positive return of several regional developers, aiming to deliver sites overlooked by the national house builders and often delivering a high quality, niche product. For these clients, the challenge has been about securing land and development finance at a level that enables them to efficiently manage their cashflow through development and still deliver an adequate commercial return.
Finally, for Local Authority clients, not only have they sought to generate value from their own assets, but they also clearly act as the delivery agency for much of the new government policy. They therefore play a vital role in encouraging new development and managing the planning process but have had to do so while incurring substantial cuts to budgets brought about by reduction in public funding. This has brought significant challenges and frustrations to the delivery of a more streamlined planning process.
While the Government’s encouragement of new development is welcomed and providing a positive impact on some areas of the North East, there remains significant challenges to delivering new development across the region. Understanding these challenges and the means to address them is therefore vital for our land and development clients as we look ahead to the rest of 2018.
For information from Bradley Hall's specialist land development and new homes department, please call 0191 2328080.
