Market drivers

Perhaps contrary to many expectations in early 2020, the housing market in the UK has performed exceptionally strongly over the last 18 months, and Kent and East Sussex have been no exception. Annual price growth has been at 9%, boosted by the Stamp Duty holiday and changing buyer priorities as working from home becomes more entrenched. Over 50% of all Savills new homes buyers in the area in 2021 were moving in order to upsize, with space for a home office being a common priority.

Locations slightly further from London have become more attractive as the requirement for many to commute into the capital every day diminished. Dartford and Sevenoaks have historically both attracted significant numbers of movers from London, helping drive their local economies. But Tunbridge Wells has seen the biggest uptick in demand from Londoners post-pandemic, with numbers up by 3.3% - making it the fourth most desirable town for Londoners, after Dartford, Sevenoaks and Gravesham.

This is reflected in working from home data, which saw the number of workers based mainly at home in Tunbridge Wells jump by 10% to a total of 27% between 2019 and 2020. This puts Tunbridge Wells as the local authority with the highest proportion of homeworkers across the entire country.

Demographics

The average ages and incomes of new build home buyers varies dramatically across Kent & East Sussex, but there is a general trend of young and relatively affluent buyers predominantly looking for family housing. However, there are variations, with locations on the coast further from London tending to attract older buyers looking to downsize.

The typical new build buyer in Sevenoaks has a household income of £63,000, and an average age of 37 for instance. At the other end of the spectrum is Eastbourne, with the average new build buyer being 53, with a household income of £33,000 – although this is likely skewed by retirees with low earnings, but relatively high levels of equity.

Diversifying delivery

Help to Buy has been key in this area due to the unaffordability of the local housing market, supporting 44% of new build sales between 2013 and the end of 2020, someway above the national figure of 31%. With the scheme coming to an end in 2023, developers may also wish to diversify their offerings. We expect to see an increase in mixed tenure developments, with an increase in the volume of Shared Ownership homes, as well as a greater focus on Build to Rent (BtR).

BtR has already secured a foothold in Kent & East Sussex, with 938 units complete, and a further 425 in planning. Medway stands out with over 300 units, followed by Tunbridge Wells with 233 BtR homes completed. While most of these are flats, there is also growing suburban BtR market, the Medway towns, and other well-connected areas are likely to see the greatest expansion in this sector – again benefiting from their strong links to the capital.

With rising house values, but also relatively strong incomes in parts of Kent & East Sussex, BtR is well placed to expand into some of the gaps opening up in the market after Help to Buy ends next March.

More modest growth ahead

The strong recent performance of the housing market has led to increasingly stretched affordability. Consequently, and combined with rising interest rates, we expect future value growth to be more modest – about 3% across the South East in 2022, with a five-year total of around 10.4%. However, areas like east Kent where affordability is less constrained and there is headroom for growth are most likely to outperform the region.

Rents have seen a turbulent couple of years, dropping sharply in major cities, but seeing steady growth elsewhere, up 6.3% in the year to November 2021 across the South East. Rental growth is anticipated to remain relatively strong over 2022, at about 6%, before dropping to 3.5% in 2023 – largely in line with expected income growth. This puts five-year rental growth at 20.0% across the South East, slightly above the national rate of 19.0%.

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