Property markets in the South West are a good deal more buoyant compared with the 1990s, although affordable housing is still a problem. But had someone 10 years back predicted that property would be the crane-hoisting, digger-wielding profit-maker that it is today in the South West, many of us would have wondered if they had been at the scrumpy.
That view may seem uncharitable or unimaginative now, but back then the South West was perceived as a backwater by most commercial and residential developers. It was a market worth dipping into during good times, but you needed to prepare for a quick return to Bristol if and when it wobbled.
In 2006, the position could not be more different. Major UK housebuilders such as Bellway, David Wilson Homes, Barratt, Persimmon, Redrow, David McLean and KingsOak now have major presences in the region. Of those, Bellway, Barratt, Persimmon and Redrow have regional offices based south and west of Bristol.
Major commercial redevelopments are bringing new life to both Exeter and Plymouth. The Exeter Business Park is home to the new headquarters of the Met Office, as well as the new regional office for SWEB Energy, while the new Woodwater Park at Pynes Hill, Exeter, an 8.75-acre out-of-town office campus, is now home to a number of firms. Even Cornwall, once a real estate no-go (or no-build) area, has started to become more interesting to a few developers.
Demographics and lifestyle issues have played a huge role in these changes. Not for nothing did one Bristol law firm base an entire recruitment campaign around the prospect of popping down the road for a post-work surf. The population of the South West is rising annually, a trend that is expected to accelerate for at least the next 20 years, but which has led to a shortage of housing, especially in the affordable category.
Last year, the CBI, the Homebuilders Federation, the National Housing Federation and Clarke Willmott staged a conference that brought together more than 100 delegates from the Government, housebuilders, the registered social housing sector and professionals working in and around the various development industries. The results were revealing. The lack of affordable housing in the South West did not just affect a few rural communities south of Okehampton, it was also seen as a significant impediment to building a successful regional economy.
The Government, through the Regional Housing Body, has increased public investment in affordable housing to around £203m over the next two years (2007-08) from £116m spent over 2005-06. However, the affordability gap in the South West was identified as the worst in the country, with 18 districts in the South West among the 40 most unaffordable in the UK.
Average house prices have now risen to 9.5 times the average income, compared with 4.2 in 1997. The least expensive homes to buy (lower quartile) are now 6.3 times the average South West income, leaving a family or individual wanting to buy an average South West home with an income of £52,000 to find.
Delivery of housing against strategic planning is also down. Targets of 22,000 homes a year, of which some 6,000-10,000 should be affordable, need to improve dramatically. On 10 March, the South West Regional Assembly agreed to increase the target number of houses to be delivered annually in the region from 22,000 to 23,060 – a small step in the right direction.
Despite 190,000 new homes being built in 2004 in the UK, targets are not being met. According to The Housing Market Intelligence 2005, newbuild completions in the South West were 15,200 in 2005 compared with 14,787 in 2004 – a mere 2.8 per cent increase. In fact, the draft South West Regional Economic Strategy suggests that this should be raised to 25,000 to promote economic growth.
The local view is that greater certainty in the planning process and a new planning system would help. And the South West Housing Initiative has no doubt that, until the problem of affordable housing is resolved, it will continue to be difficult to attract inward investment.
Commercial property boom
It is not just the housing market that has changed. Across the region and across all sectors, the commercial property market has emerged as a significant indicator of the region’s nascent economic success.
Again, these projects defy the development terminology of the 1990s. Indeed, a key signifier of the market’s upward revision is the emergence of regeneration schemes, altogether grander in scale and budget than mere ‘developments’. The Regional Development Agency helped kickstart a number of schemes that simply would not have been considered viable back in the early 1990s. From St Austell (town centre redevelopment) to Gloucester (docks regeneration) to Swindon (town centre regeneration), we have seen or are seeing the start of work on comprehensive mixed-use schemes, all the result of PPPs.
The success of the Met Office relocation to Exeter is a case in point. Initiatives of this type have had a huge impact on the region as a whole, increasing the pressures not just on housing, but on retail, leisure and office schemes, which brings us back to the issue of infrastructure. People want to live and work in the South West. The region, then, needs to continue gearing up its infrastructure to take advantage of the business opportunities this presents.
There is further evidence in the office market. Prime office-space rents have hardened, with some commentators reporting average increases of 25 per cent over the past two years, much of it in the past six months. Bristol office rents have now reached the unprecedented (for the city) rate of £24.50 per sq ft.
The Bristol retail market is also undergoing a much-needed transformation. Its main stomping ground, the pastorally named Broadmead has changed dramatically since Christmas. Under this bold scheme, the term ‘clearance’ has for once meant exactly that, with demolitionists paving the way for new retail operators such as Harvey Nicholls.
This scheme has generated an air of expectation – and not just for retail enthusiasts and property watchers. It is also having a considerable ripple effect throughout the rest of the region. Weston-super-Mare, Taunton, Yeovil – and beyond- will all be seeing new schemes over the coming months.
As the population continues to drift westwards down the M4, the challenge for developers, planners and the Government is to ensure we have enough housing stock at all levels to provide homes for all those who want to live in the South West.
David Powell and Stephen Rosser are property partners at Clarke Willmott