Along the south coast of England, the cities of Southampton and Portsmouth and the wider M27 corridor region, are on the up.  

Consumer spending, an expanding tech sector, and both public and private investment have all contributed to strong economic growth in the region, and over the next five years the economy is forecast to grow 9.5 per cent, outperforming the UK average.

However, this economic growth will place further pressure on what is already an undersupplied housing market. The most recent Strategic Housing Market Assessment for the six local authorities in the region highlights the need for at least 4,000 additional homes per year. Despite delivery of new homes having increased over the last five years to 3,060 (as of March 2016), there still remains a shortfall of some 940 homes per year.

The effect on house prices

In part as a result of this undersupply, house prices in the M27 corridor grew between 8.0 per cent and 10.7 per cent last year, out performing the national average of 7.1 per cent. Despite this, the area is still relatively affordable compared with its more affluent neighbours. In Portsmouth and Southampton, the average price of a home stands at £205,000 and £208,000 respectively – much lower than neighbouring Winchester, Chichester and East Hampshire, where values stand close to or above £400,000.

In these neighbouring markets, values have been boosted by better transport connections to London, the status of Winchester and Chichester as cathedral cities, and the appeal of nearby South Downs National Park.

Within the M27 corridor, average house prices in the local authorities of Fareham and Eastleigh stand at £285,000, lifted above other areas by the presence of desirable villages such as Sarisbury Green and Hamble which can be found within them. 

With strong growth forecast and a clear undersupply of homes future demand needs to be met if the region is to continue to prosper. Large development sites such as Welborne Garden Village and Boorley Green could be instrumental in achieving this and have the potential to bridge the value gap between lower value urban areas in Portsmouth and Southampton and higher value rural ones.

Mixed use schemes

The area currently has 13,800 homes under construction or with planning consent and under the current build rate it will take four and half years for these new homes to be delivered. While residential schemes dominate the current development pipeline, there is still potential for more work places to come forward through mixed-use developments. Public sector support, both locally or through national initiatives such as the £3bn Home Building Fund, can help provide development finance and offset the costs of site preparation. Below we outline three emerging development hotspots to watch.

1. West Quay and Royal Pier, Southampton

The £85 million Watermark leisure complex, which includes over 20 restaurants, is being developed alongside WestQuay Shopping Centre. There are currently 260 flats being marketed in its second phase, while its central location provides an opportunity to deliver homes for rent as well as for sale. WestQuay is likely to act as a catalyst for the £450m development of neighbouring Royal Pier that will transform Southampton’s waterfront, with  plans including  500,000 sq ft of offices, 730 apartments and around 40 shops. The Royal Pier Development Company has been set up to work with the three landowners: Southampton City Council, Associated British Ports and the Crown Estate, with anticipated completion around 2032.

2. Tipner-Horsea Island

The Tipner-Horsea site, close to Portsmouth City Centre, has potential to become a key gateway to the city. It could bring forward 2,370 new homes and 580,000 sq ft of employment space for the growing marine and advanced manufacturing sectors while creating over 3,700 jobs. However, contamination, flood risk and lack of infrastructure present development challenges that must be overcome. An investment of  £48 million from the City Deal and further Portsmouth City Council support, including the building of the new motorway junction on the M27, will all act to help unlock this development opportunity.

3. North Whiteley

North of the M27 between Southampton and Fareham, this site has outline permission for 3,500 homes to be built from 2018. As an urban extension to Whiteley, it will provide a very different offering to the more urban sites in Portsmouth and Southampton, hoping to attract higher paid workers who would otherwise choose to live in the surrounding villages. Enhanced leisure and retail facilities at the nearby redeveloped Whiteley Shopping Centre have improved Solent Business Park as a location and will in turn increase the demand for more new homes.

Further information

Read more: The Future of the M27 Corridor