The new build market

New build housing being built across Guildford and the surrounding local authorities varies hugely, with homes sold in the 12 months to May 2019 ranging from apartments worth £200,000 to more than £2m.

Apartments have dominated the market in Guildford in recent years with permitted development and urban in-fill schemes. Family housing-led schemes have been few and far between. Those housing schemes that have come through have tended to be small in size, rural in location, and targeted at the upper end of the market.

Over the three year period between 2016 and 2018, just 26% of new build homes were houses, the rest were apartments. This differs to a split of 56%/44% in favour of flats to houses across all five local authorities combined. The split between flats and houses has remained fairly static since the Global Financial Crisis. Guildford has also seen a number of retirement living schemes in recent years. With an ageing population and built-up equity amongst this sector, the area is ripe for such product.

Where are buyers coming from?

Around 50% of all household moves to Guildford’s built-up area are from households that already live within the town itself. Those that move from further afield typically come from South West London with road and rail links, especially the A3, clearly a well-trodden corridor. Places such as Esher, Raynes Park, Wimbledon and Clapham have all seen significant out-migration into Guildford over the past couple of years, as London based buyers look to release equity or upsize.

According to Savills deal book from 2016 to 2019, 66% of those buying in Guildford do so as their main residence with 28% as an investment. The most commonly cited reason for buying (38%) was upsizing, highlighting the importance of delivering family housing. The largest proportion of buyers are those aged 30 to 39 and 40 to 49, accounting for 31% each. Only 11% are 1st time buyers, compared with 18% across Surrey as a whole, which shows the challenge of getting on the housing ladder.

Changes to Help to Buy

Help to Buy has had a varying impact across the wider Guildford area, supporting the sale of 13% of all new build sales since 2013. This average, however, disguises the huge difference between local authorities. Help to Buy was used in just 3% and 4% of new build transactions in Guildford and Elmbridge respectively, but for 21% in Woking.

Looking forward, a new Help to Buy cap is set to be introduced from 2021 onwards, reducing the limit for properties eligible for the scheme from £600,000 to £437,600 in the South East, and only for use by first-time buyers. However, the impact of this cap should be limited in this area, as it supports a relatively low proportion of all transactions; currently, almost 40% of transactions are already above the £600,000 limit. The greatest impact will be in Runnymede, wherein the year to Q2 2018, we have estimated that 49% of homes acquired through the scheme would have been “lost” if the cap was in place.

If developers are to continue to benefit from Help to Buy until the scheme is due to end in 2023, they will likely need to build smaller sized houses and flats so that they fall within the £437,600 cap.

PBSA development catching up with demand

As the University has prospered, the number of students it caters for has grown considerably, with more than 15,500 full-time students in 2018/19. There are plans to extend this further to 18,000 by 2022 and 23,000 by 2027, although not all students will live in Guildford. Currently, 70% of the University’s students are based in Guildford. Added to the 800 students at the Academy of Contemporary Music, the number of full-time students in the town are estimated at 11,500, around 8% of the local authority’s population. By 2022 the student population in Guildford is expected to increase to 13,400.

To meet this demand, purpose-built student accommodation has seen an increase both from the University itself, along with the private sector. Guildford currently has around 6,000 PBSA beds owned and operated by the University, with 185 from the private sector.

Another 2,750 beds are in the pipeline with over 1,600 of these currently under construction across three schemes. The impact of this supply on the local market will be an interesting question. As it stands around 54% of full-time students in Guildford are catered for in the PBSA market, the rest are likely to be in the HMO sector. If the total pipeline was built out by 2022, this share will rise to 67%. Assuming four students on average share in the HMO sector, this would take 215 homes out of the student housing market and back to family housing.

Potential to deliver alternative tenures

With homeownership out of reach for many, the private rented sector becomes all the more important. However, build to rent is yet to contribute to supply in Guildford, as the mismatch between supply and demand of open market housing means that housebuilders are able to outbid build to rent operators for plots either with or without planning.

However, there are some signs that this trend is beginning to change. An application for 200 build-to-rent homes on Walnut Tree Close to the north of the town was submitted by Peveril Securities with a forward funding deal in place with M&G Investments, although it was subsequently withdrawn with plans approved for a student scheme in its place.

Guildford is set to see build-to-rent in the form of co-living, with 113 units under construction aimed at young professionals. PBSA specialist and operator Scape is building the ‘compact living’ block in conjunction with more than 400 student beds within the same scheme. The success of the scheme, both from the market and local authorities’ perspective could be seen as a litmus test for any future proposals.

_{Read the articles within Guildford: Driving Surrey below.}