Across Wales, first-time buyer numbers are up, and this trend is also strong in the Cardiff and Newport new build markets. Savills dealbook data for South Wales (Graph 1) shows 49% of buyers aged under 40 in 2014. Other sources confirm the trend, with the Council of Mortgage Lenders (CML) data for Wales in Q4 2014 showing a 14% year-on-year increase in loans to first-time buyers, compared to a 4% rise in homemover loans over the same period.

^{Source: Savills Research}

After the recession in 2008, the city centre market for apartments in Cardiff was dominated by second home buyers and downsizers aged 55+, as mortgage finance for buyers without significant equity dried up. The former group, typically with a primary residence in rural Wales or London, were looking for a pied-à-terre in the city centre – convenient for rugby at the Millennium Stadium or arts at the Millennium Centre.

Younger buyers have supplemented rather than replaced this group. Downsizers and second home buyers remain key buyer types, attracted by properties with high levels of specification in prime areas such as Pontcanna at prices up to £350k. At this top end of the market, completed stock rarely comes to market as off-plan sales to cash buyers are the norm.

In 2014, price levels in Cardiff for city centre apartments ranged from £250 to £325 per sq ft. A penthouse at Cardiff Bay Investments' Empire House scheme was sold for just under £1m, making it the most expensive apartment ever sold in Wales. Houses achieved values in the £200 to £250 psf range for volume developments, with some niche developments of under 10 houses in the best areas reaching £280 per sq ft.

The latest pricing data from Savills Cardiff shows that values for city centre flats have increased slightly over the course of 2014. At some developments, agreed prices for properties recently reserved are around 10% higher than for similar properties at the same schemes in early 2014.

First-time buyer boost

Help to Buy: Wales has assisted almost 1,400 completions since launch in January 2014, 74% to first-time buyers. The average age of buyers in the scheme is 30, with an average sale price of £178k. £48.7m of the available £170m funding has been spent so far, and a Government announcement on the possible extension of the scheme beyond the scheduled March 2016 closing date is expected later this year.

Along with the boost provided by Help to Buy, the wider economic recovery has led to an improvement in market sentiment, with potential buyers more confident and finding mortgage availability much improved. Help to Buy can also be credited with opening up the idea of purchasing a new build for younger buyers who may not have considered it previously.

Economic growth also increases demand for non-residential property, and new commercial space is coming to the market and being occupied quickly. Recent examples include the BBC moving its Welsh head office to Capital Square in Cardiff, taking 150,000 sq ft, and the Admiral Group moving 500 employees to a newly developed office in Newport, in addition to moving to a new head office in Cardiff. In response to job creation new people move into the area, further increasing the need for housing.

Flats are the most popular new build product in Cardiff, due to first-time buyers and downsizers both being key markets. Graph 2 shows that in Cardiff flats make up over 70% of the new property sales recorded by the Land Registry (in the year to February 2015), compared to 15% across Wales as a whole. Even in the cities of Swansea and Newport less than a quarter of new homes are flats, reflecting the unique nature of Cardiff’s market.

^{Source: Land Registry (year to February 2015)}

Seeking value in Newport

In Cardiff the average sale price of a new build flat was £179k for the year to February 2015, with sales mainly ranging from £120k to £220k, according to Land Registry data. For second hand flats, the average sale price over the same period was £144k. The premium for houses is even greater, with new homes averaging £383k and second hand at £216k.

With prices in Cardiff powering ahead, local buyers seeking more affordable property but still wanting a city centre location may consider Swansea or Newport. Average values in Newport are around 40% lower than Cardiff.

Local employment growth is a key driver of market activity, with regeneration of the city centres leading to improved sentiment. Investment totalling £250m has been committed to the regeneration of Newport, with a new retail and leisure scheme underway. A further major attraction is Celtic Manor Resort, having increased Newport’s profile by hosting the Ryder Cup in 2010 and the 2014 NATO Summit.

University demand

Home to three universities (and the Royal Welsh College of Music and Drama), students are a major source of tenants for Cardiff’s rented stock. One interesting trend is parents buying a flat for their university-bound child, with the option of renting it out as a traditional buy-to-let if they move away after completing their studies.

Additional tenant demand will come from demographic change. Cardiff is expected to have the fastest growing population in Wales, according to the official projections, adding over 20,000 households a year on average over the next 25 years. Our projections show a majority of these will be added in the PRS. The number of households in the private rented sector in the city doubled between 2001 and 2011, and we expect that further increases are likely.

Large developments

New build activity in Cardiff is quite restricted. Redrow Homes are currently on-site with the only conventional housing development, situated in Lisvane. You can find more bespoke housing at the Greenbank development Cardiff Pointe, a waterside scheme in Cardiff Bay.

^{Source: Savills Research}

The shortage of active sites is due to delays with the replacement Local Development Plan. All previously allocated sites had been taken up many years ago and Cardiff has been slow to bring in a new plan.

There are proposals to allocate land for over 40,000 new homes in Cardiff for the plan period up until 2026. This includes several major urban extensions and there is some concern that there will be an oversupply of new housing if those allocations come forward at the same time.