Steady demand underpins house price growth in Bristol, but volumes of future housing delivery remains uncertain.
Bristol needs more new homes. Despite a growing population and strong demand for property from investors and owner occupiers alike, the number of completions has fallen continuously over the last four years.
The trend is forecast to accelerate with the number of completions dropping off further still over the next five years, according to the city council. Less than 1,000 new homes are expected between 2016 and 2017, compared with more than 2,500 between 2008 and 2009.
The decline in building comes at a time of rising demand for more homes, from a population that is growing at a faster rate than the rest of the country. Census figures show that the number of people living in Bristol has already risen by about 10% over the last decade.
A population of 428,100 makes Bristol the largest city in the South West, but this figure is expected to reach 460,800 by 2020. If present trends continue, there could be just over half a million people living in Bristol by 2035.
In the shorter term, employment (by number of employees) is forecast to grow by 7% over the next five years in Bristol, above the rate in the South West as a whole, at 5%. Sectors forecast to grow strongest are finance and business services (15%), followed by leisure and personal services (11%) and retail (10%).
The mismatch between supply and demand has contributed to a strong recovery in property prices since the market slumped. Bristol still lags behind Bath, but Bristol’s recovery has outperformed the regional average according to the Land Registry index. Average property prices in Bristol are now about 10% below peak levels, which is in line with national levels. Transaction levels are high compared with most of the country, but remain well below their peak as the result of a constrained mortgage market and limited supply of homes for sale.
As a proportion of second hand stock, new build sales levels in Bristol are in line with the rest of the country. In 2011, 11% of all property transactions in the city of Bristol were new homes, compared to 10% in England & Wales. In the first three quarters of 2012, this had fallen to 9% as the new homes pipeline slowed. This is still significantly down on 2008 levels, when 22% of all transactions in Bristol were new build. At the time, there was greater supply of new build dwellings on schemes that were under construction at the start of the housing market downturn.
A severe constrain on new build stock has resulted in encouraging results for the developments which are brought to the market. However, buyers remain particularly price sensitive and are attracted to schemes that are well marketed and priced competitively; this may in part be a result of the return of investor buyers to the market. Bristol’s average £ per sq ft new build values in the context of other higher high-value towns is shown in Table 1.
Certain schemes achieve higher prices. There is still a market for prime new build stock in the best areas of Bristol, as evidenced by two recent schemes in Clifton and Leigh Woods, where achieved prices have averaged £445 per sq ft on sales over the last two years. There is a strong demand for large new build and converted apartments in these locations amongst downsizers, who are often not as budget driven as other purchasers in the mainstream market.
Buy-to-let investor demand, in particular those buying for student children, continue to be an important driver of the Bristol housing market, supporting the private rented sector.
The housing market downturn prompted a shift in the type of buyers of new build homes from investors to owner occupiers, however, the last few years has seen that pattern begin to reverse. Sales to investors accounted for 39% of all recorded sales by Savills in 2012. This can be compared with only 11% in 2010.
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