Developer funding

A constrained lending environment means many developments are still proving difficult to finance, in particular brownfield, apartment led, developments. As a result, smaller niche developers, who might be attracted to smaller city centre sites, are finding it more challenging to raise finance at acceptable loan to value (LTV) margins.

Completions of new dwellings in Bristol dropped 32% between 2008/09 and 2010/11, but have since stabilised. Apartment volumes have suffered most, while house completions have remained relatively constant, reflecting sustained demand from owner occupiers (see Graph 4).

Development pipeline

As it becomes more difficult to accommodate a growing population within Bristol’s Local Authority boundaries, development is shifting out of town, where there is availability of larger sites. The next phase of large-scale housing development will see sites in Emersons Green (South Gloucestershire) and Keynsham (BANES) developed. These suburban locations have been popular with developers because they meet the demand for low-density family housing.

Further down the line, it is possible that developers’ flight out of town will be compounded by the new Community Infrastructure Levy (CIL), which took effect at the start of the year. The tax levied by Bristol City Council on developers, adds £70 per square metre on residential development in inner zones, and £50 per square metre on residential development in outer zones. There is no charge on commercial development, but the levy rises to £120 per square metre on retail development.

With building space running out within the boundaries of Bristol City Council, it is the lack of sites rather than taxation that is more likely to prompt developers towards the neighbouring local authorities of South Gloucestershire, North Somerset and Bath and North East Somerset.

In the ten years to 2012, 18% of Bristol’s new homes were delivered within Cabot ward. Based on current sites with planning permission, this will drop to 8% in the coming decades. By contrast, Lawrence Hill, the most deprived ward in South West England, will see delivery increase from 11% to 29% of Bristol’s total past and future supply. Map 1 shows future supply in Bristol, based on residential units with planning permission (each dot represents the sum of all units by ward, rather than individual sites).

The shift to secondary areas reflects the shortage of suitable higher-value sites in the city centre. These more peripheral locations may be harder to develop because of smaller margins and the local market preference for houses rather than flats.

Taken from
Spotlight: Bristol Residential Development Sales March 2013