The Mid Sussex Property Market and Hammond’s Budget Promise to Build 300,000 more homes

I miss the good old days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, the nearest Philip Hammond got to donning a ‘Bob the Builder’ outfit was at his grandchild’s birthday party. However, with what appears to be a change in focus by the Tories to ensure they get back in power in 2022, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.

Nationally, the number of new homes created has topped 217,344 in the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 1,000 ‘net additional dwellings’ in the last 12 months in the Mid Sussex District Council area, a decent increase of just 156.5% on the 2010 figure.

The figures show that 82.6% of this additional housing was down to new build properties. In total, there were 826 new dwellings built over the last year in Mid Sussex. In addition, there were 188 additional dwellings created from converting commercial or office buildings into residential property and a further one dwelling was added as a result of converting houses into flats.

While these all added to the total housing stock in the Mid Sussex area, there were 13 demolitions to take into account.

I was encouraged to see some of the new households in the Mid Sussex area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.

With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had re-utilised vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Mid Sussex housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!

Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus. I was glad to see the Government introducing a variety of changes to improve housing, including more funding for the supply side and an injection of urgency into the planning system.

The biggest question is, just where are the Government going to build all these new houses? Maybe a topic for a future article?

Back to the main point though and the focus on the housing market by the Tory’s is good news for all homeowners and buy to let landlords, as it will encourage more fluidity in the market in the longer term, sharing the wealth and benefits of home-ownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants.

10.21% of Mid Sussex is Built on; Building Plot Dilemma or Not?

Well the fallout from the recent Budget is still continuing.  I was chatting to a couple of people from the Mid Sussex area the other day, when one said, “There isn’t enough land to build all these 300,000 houses Philip Hammond wants to build each year”, and if you read the Daily Mail, you would be forgiven for thinking the Country was at bursting point: or is it?

It was 60 years ago the first satellite was launched (Sputnik). All the Superpowers have used them to take high definition pictures of each other for decades, but now satellites and their high-powered cameras are being used for more peaceful purposes. The European Environment Agency (EEA) have been taking high definition pictures of the UK from outer-space to give us a focused picture of what every corner of the Country really looks like and the findings will come as a surprise.

As my blog readers know, I always like to ask the important questions relating to the Mid Sussex property market. If you are a Mid Sussex landlord or Mid Sussex homeowner, this knowledge will enable you to make a more considered opinion on your direction and future in the Mid Sussex property market. Like every aspect of all economic life, it’s all about supply and demand, because over the last twenty or so years, there has been an imbalance in the British (and Mid Sussex) housing market, with demand outstripping supply. This means the average value of a property in Mid Sussex has risen by 389.79%, taking an average value from £76,400 in 1995 to £374,200 today.

Using the information from the EEA and data crunched by Sheffield University with their Corine-Land Cover project, I posed them a few questions about the local area, interesting questions I would like to share with you.

1. What proportion of the whole of Mid Sussex is built on?

10.21%

That surprised you, didn’t it! In the study, land classified as ‘urban fabric’ defined has land which has between 50% and 100% of the land surface is built on, (meaning up to a half might be gardens or small parks, but the majority is built on).

2. How much land is intensively built on locally?

Of that amount mentioned above, how much of it is high-density urban fabric? (I.e. where 80% to 100% is built on – still leaving 20% for gardens) 0.17% - again I bet that surprised you!

3. So how is the land used locally?

Industry             0.25%

Sports Facilities  3.29%

Arable Farmland 24.27%

The rest being made up of various other types such as forests, pastures and waterways, etc.

Mid Sussex and the surrounding areas are greener than you think! In fact, I read that property covers less of the UK than the land revealed when the tide goes out. The assumption that vast bands of our local area have been concreted over doesn't stand up to inspection. However, the effect of housing undoubtedly spreads beyond its actual footprint, in terms of noise, pollution and roads.

Now I am not suggesting for one second we concrete over every inch of the locality, but the bottom line is we, as a country, are growing at a quicker rate than the households we are building. I appreciate the emotional effect of housing is greater than other land use types because most of us spend the vast majority of our time surrounded by it. As Brits, we live our lives driving along roads, walking on footpaths and working and living in buildings meaning we tend, as a result, to considerably over-emphasise how much of it there is.

In fact, I was only flying home recently back from a short break abroad, when I looked down and I was reminded just how green Britain actually is!

The bottom line is Mid Sussex people and the local authorities are going to have to put their weight into building more homes for people to live in. There is going to have to be some give and take on both sides, otherwise house prices will continue to rise exponentially in the future and Mid Sussex youngster’s won’t be able to buy their own Mid Sussex home, meaning Mid Sussex rents and demand for private rented accommodation in Mid Sussex can (and will) also grow exponentially.

Supply and Demand Issues mean Burgess Hill Property Values Rise by 4.8% in the Last 12 Months.

The most recent set of data from the Land Registry has stated that property values in Burgess Hill and the surrounding area were 4.8% higher than 12 months ago and 15.29% higher than January 2015.

Despite the uncertainty over Brexit as Burgess Hill (and most of the UK’s) property values continue their medium and long-term upward trajectory. As economics is about supply and demand, the story behind the Burgess Hill property market can also be seen from those two sides of the story.

Looking at the supply issues of the Burgess Hill property market, putting aside the short-term dearth of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.

The draconian planning laws, that over the last 70 years (starting with The Town and Country Planning Act 1947) has meant the amount of land built on in the UK today, only stands at 1.8% (no, that’s not a typo – it’s one point eight percent) and that is made up of 1.1% with residential property and 0.7% for commercial property. Now I am not advocating building modern ugly carbuncles and high-rise flats in the Cotswolds, nor blot the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as Hassocks, Sayers Common and Ditchling.

The facts are, with the restrictions on building homes for people to live in, because of these 70-year-old restrictive planning regulations, homes that the youngsters of Burgess Hill badly need, aren’t being built. Adding fuel to that fire, there has been a large dose of nimby-ism and landowner deliberately sitting on land, which has kept land values high and from that keeps house prices high.

Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit. Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.  

The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least. Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000’s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007; the worst drop Burgess Hill saw in property values was just 25.08% in the 2008/9 credit crunch.

Despite the slowdown in the rate of annual property value growth in Burgess Hill to the current 4.8%, from the heady days of 19.11% annual increases seen in early 2010, it can be argued the headline rate of Burgess Hill property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit. With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Mid Sussex (and the UK).