Since the credit crunch, cities such as Cambridge have benefited from a growing trend of households preferring to live within a thriving urban environment. This has resulted in a pattern of affluent UK cities outperforming their comparatively less prosperous counterparts in the housing market.

In Cambridge, house price growth has been very strong. Average values recovered to their 2007 peak of the market in October 2011 and are now 30.5% above, according to our indices, based on Land Registry data. This growth has not been matched by the rest of the county and the gap between average values in Cambridge and the surrounding areas is at an all time high.

Over the year to January 2015, property prices in Cambridge have increased by 16.9% and the average sale price reached £419,000 with detached houses selling for an average of £757,000. This price rise is comparable to London, which saw an increase of 17.0% over the same period. In Cambridgeshire, annual growth was just 10.2% with an average sale price of £272,000, which is in line with the England and Wales average of £261,000.

Strong demand

Increased demand for housing stock and strong population growth in Cambridge can be attributed to a number of factors. Over the ten years to 2014 the population of Cambridge increased by 13.8% according to Oxford Economics – this is significantly higher than the 7.6% average population growth in the UK and is in line with the strong increase seen in London of 14.7%.

The buoyant employment market and the strength of the local economy have played a significant part in attracting both people and businesses to the city. The 2011 census shows the proportion of people working in higher managerial, administrative and professional occupations in Cambridge is more than twice the UK average at 27.0% and 12.8% respectively.

click image below to enlarge

^{Source: Savills Research using Land Registry, 12-month rolling average index}

Rising sectors

The biggest employment sector in Cambridge is education, accounting for nearly a quarter of all employees in 2014, according to Oxford Economics. The University of Cambridge itself has more than 9,500 direct employees and its presence has meant that education has been the largest industry in Cambridge for some time.

Two of the fastest growing industries have been ‘human health and social work’ and ‘professional, scientific and tech’. Over the past ten years they have both overtaken the ‘wholesale and retail trade’ sector to become the second and third largest industries in Cambridge with an increase in the number of employees of 44.4% and 53.4% respectively.

CLICK IMAGE BELOW TO ENLARGE

^{Source: Oxford Economics}

Silicon Fen

In particular, the rise of the technology and bio-science industries in Cambridge has been grabbing the headlines. Cambridge and its surrounds are often referred to as either the Cambridge Cluster or Silicon Fen, because of the density of high-tech businesses and technology incubators that have developed on science parks around the city. There are currently more than 1,500 technology-based firms in the region who employ over 57,000 people.

The arrival of AstraZeneca, Britain’s second largest pharmaceutical company, at the Cambridge Biomedical Campus is significant. They plan to establish a new £330m Global Headquarters for 2,000 employees, which will add 2% to Cambridge’s workforce. Papworth Hospital also recently gained planning permission for a £165m move onto the site.

Transport links

Although Cambridge is not reliant on London, the fast commuter links to the capital certainly add to the appeal of the city, particularly given that a cluster of tech companies such as Google and The Wellcome Trust are now based at King’s Cross. The 2011 census shows us that 2.3% of the population commute to London on a daily basis and this increases to a third of buyers of properties over £1m according to Savills data. Looking forward, we expect a growing number of buyers in Cambridge and the surrounding areas to come from London.

In July 2014, construction began on a new railway station at Chesterton, near the city’s science park to the north of the city; this is due to be operational in 2016. The station will form part of the Fen Line, which runs from Cambridge to King’s Lynn and will connect to the guided busway. The aim is to take pressure off the main station and reduce congestion in the city. This will provide easier access to the area which should boost the local housing market.

Other demand

Employment is not the only driver for the housing market, retirees and downsizers are also a powerful force within it. While first time buyers and second steppers are generally constrained by the mortgage market, downsizers tend to be cash buyers.

Cambridge is a popular choice for downsizers who are often making the move from the countryside to an urban location with more conveniences on their doorstep. The excellent health facilities are also an attraction for these buyers.

In the high value prime markets, there is also demand from overseas, particularly Europe and China. International buyers account for 22% of sales in the prime second hand market and 24% in the new build.

Cambridge is one of the few locations outside of London to see this level of international interest, illustrating the global appeal and stature of the city.

CLICK IMAGE BELOW TO ENLARGE

^{Source: Land Registry}