Please find the latest in our suite of Residential research reports, the Spring 2016 New Home Residential View. In this edition we include a focus on which of the London Borough’s most need to increase their new home construction rates, and also which local markets in the regions are most reliant on the Help-to-Buy equity loan scheme. If you have any questions regarding the report, or would like any further information, please feel free to contact me. lee.layton@carterjonas.co.uk

1. NEW HOMES

2. 2
TO THE INAUGURAL EDITION OF
RESIDENTIAL VIEW, SPECIFICALLY
FOCUSSED ON NEW HOMES.
In this issue we explore both the London and regional new homes
markets, and focus in particular on the Help to Buy Equity Loan
Scheme and its place in today’s market. We advise on residential
developments and the sale of new homes from each of our UK
residential branches and especially from our new homes offices
in London, Oxford, Cambridge and Harrogate. If you would like to
discuss any of the topics in this edition, or to request help from
one of our experts, you will find the contact details of our New
Homes, Planning & Development, and Research teams at the back
of the report. We would be delighted to help you.
Private Enterprise
Housing Association
or Local Authority
Source: Department for Communities and Local Government
Figure 1
New Home Delivery Pre-2007/2008
Crash Vs Post-2007/2008 Crash
England
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-35.9%
27.7%
Source: Department for Business Innovation Skills
Figure 2
Building Material Cost
12 month price change (December 2014 – December 2015)
Misc builders’ ironmongery
Sanitaryware
Blocks, bricks, tiles flagstones
Insulating materials (thermal or acoustic)
Ready-mixed concrete
All Bricks
Metal doors windows
Cement
Central heating boilers
Wooden doors windows **
Crushed rock - excluding levy
Plastic doors windows **
Kitchen furniture
Lighting equipment for roads
Electric water heaters
Sand gravel (excluding levy)
Screws
Asphalt products
Paint (non-aqueous)
Paint (aqueous)
Coated roadstone (excluding levy)
Particle Board
Pipes and fittings (flexible)
Ceramic tiles
Metal Sanitaryware
Pipes and fittings (rigid)
Sawn wood
Imported plywood
Fabricated structural steel
Imported sawn or planed wood
Concrete reinforcing bars
-25% -20% -15% -10% -5% 0% 5% 10% 15%

3. carterjonas.co.uk 3
Figure 3
New Home Completions (England)
Private Enterprise Vs Housing Association/Local Authority
Private Enterprise (LHS)
Housing Association or
Local Authority (RHS)
Recent figures from the
Department for Communities and
Local Government show that the
construction of new homes in
England significantly increased
(by 21%) during 2015, compared
with the previous year. The 2015
figure of 142,890 is just below the
pre-market crash annual average
of 149,559 and represents an
encouraging, albeit small, step
towards resolving the housing
crisis. However, this increased rate
of growth may be short-lived, as
labour shortages hold back delivery.
This means that completing the
240,000 homes per year needed
to satisfy demand, or even the
government’s own 200,000 annual
target, may prove to be a little too
ambitious in the near term.
Another positive trend seen at the
end of 2015/in early 2016 was much
needed stability in the cost and
supply of construction materials
(figure 2). The rate of material
cost inflation has cooled and brick
stocks have continued to recover,
OVERVIEW to currently stand at a three and
a half year high.
Despite disappointing Q4
figures, it was also a relatively
good year for the delivery of
new social housing, with almost
28,000 units completed –
continuing the post-recession
recovery. A comparison of the
pre- and post-recession averages
reveals that the delivery of new
homes by housing associations
or local authorities has increased
by over 27%, whereas the
number of new homes delivered
by private enterprise has fallen
by 36% during the same period
(see figure 3).
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
12,000
10,000
8,000
6,000
4,000
2,000
0
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Source: Department for Communities and Local Government
CONSTRUCTION OF NEW
HOMES IN ENGLAND
SIGNIFICANTLY
INCREASED (BY 21%)
DURING 2015

4. 4 Source: Department for Communities and Local Government
Figure 6
Volume of Help-to-Buy (Equity Loans) issued since launch
London Boroughs
Havering
Bexley
Barnet
Bromley
Greenwich
Hillingdon
Croydon
Barking Dagenham
Lewisham
Enfield
Newham
Wandsworth
Ealing
Merton
Sutton
Harrow
Waltham Forest
Tower Hamlets
Lambeth
Hounslow
Brent
Kingston upon Thames
Hackney
Islington
Southwark
Redbridge
Hammersmith Fulham
Richmond upon Thames
Kensington Chelsea
Westminster
Haringey
City of London
Camden
0 50 100 150 200 250 300 350 400 450
2015 was a record year in London for private new
home completions (18,000) and sales (26,900).
There were also a notable number of private new
home starts during the year, up 36% on 2014,
maintaining what was already a historically large
pipeline (over 60,000 units) in this tenure.
In contrast to the wider new homes market
in London, the number of private new home
starts in Prime Central London (PCL) during
2015 actually fell by 14% to 1,077, indicating that
developers are looking to tailor their output in
response to reduced overseas buyer activity.
There is growing anecdotal evidence that, in
light of this fall in demand from overseas buyers,
developers are re-focusing their product towards
the domestic market.
Brexit - While the Brexit debate remains finely
balanced, it is worth exploring both the short
and medium term attractiveness of Prime
Central London (PCL) from an overseas buyers’
perspective, and specifically, the extent to which
the exchange rate drives demand from buyers
outside the UK. Arguably, the confirmation of the
referendum date has, in part at least, contributed
4

5. carterjonas.co.uk 5
to a weaker pound. Indeed, some commentators have
predicted that Sterling could fall to a 30-year low against
the US dollar of around $1.10 in the event of a Brexit.
In such a scenario, and even when adjusted for 3%
capital value growth, an exchange rate at that level
would effectively place PCL property at a 30%
discount in relation to entry costs compared with a
year earlier (for US dollar pegged currencies). At this
point, investment in PCL residential real estate would
essentially become a play on the performance of a
post-EU Britain itself, rather than just its housing market.
Due to the capital’s global position, the strength of its
“brand” and bullish demographic growth forecasts, it is
conceivable that a London outside the EU could see a
fresh wave of long-term overseas investors.
Help-to-Buy Equity Loan (HTB EL) – While London has
accounted for just 8.3% of the total number of loans
since the launch of the Help-to-Buy scheme and four
boroughs are yet to experience any HTB EL activity at
all, there has been a strong take-up of the scheme in
the capital’s outer boroughs. As indicated in figure 6,
Havering and Bexley have witnessed significant activity,
with HTB EL being used in 35% and 30% (respectively)
of all new homes sales since launch. This has
underpinned the ongoing strong demand for sub-£500k
units in outer London. As we move further into 2016,
this demand will be further reinforced by the increase in
the upper limit for equity loans from 20% to 40% of the
price for London property.
Future demand – In figure 7 we have compared data
for historic new home construction (in terms of total
housing stock growth) with population forecasts to
establish which boroughs most need to increase their
new home delivery. What becomes clear is that all
boroughs need to increase new home construction
markedly, if significant mismatches between population
and housing stock are to be avoided. Again, it tends
to be the outer boroughs that are at greatest risk of
supply and demand mismatches. This imbalance is
already evident in the wider market, with 2015 Land
Registry figures showing the highest rates of house
price inflation in the outer lying boroughs.
Source: Experian/2011 Census/Department for Communities and Local Government
Figure 7
New Home Pressure
Historic annual housing stock growth Vs Forecast annual population growth
5 year average annual forecast
population growth rate (2015-2020)
5 year average annual housing stock
growth (2010-2015)
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
R
edbridge
K
ingston
upon
Tham
es
B
arking
D
agenhamIslington
C
ity
ofLondonEnfield
R
ichm
ond
upon
Tham
esSutton
H
aringey
H
illingdonH
arrow
W
estm
inster
C
am
den
W
altham
Forest
Southw
ark
H
ounslow
Lew
ishamN
ew
hamM
ertonB
rom
ley
W
andsw
orthB
exleyB
rent
C
roydon
H
avering
H
ackneyEalingB
arnet
Tow
erH
am
lets
G
reenw
ich
H
am
m
ersm
ith
Fulham
Kensington
C
helsea
Lam
beth

6. 6
New home construction levels in the regions
have continued their recovery, with 118,290
completions during 2015 (figure 4). This 19%
increase on 2014 was supported by on-going
strong demand from the owner-occupier market,
underpinned by the Help-to-Buy Equity Loan
scheme (HTB EL). This strong interest, and the
announcement in the Autumn Statement that the
HTB EL scheme will be extended to 2021,
has provided developers with the confidence to
increase their rates of new homes delivery.
As 2016 progresses, we expect developers to
become ever-more reliant on the owner-occupier
market, as increased stamp-duty for buy-to-let
landlords dampens investor demand. With this in
mind, we have analysed in figure 5 where HTB EL
activity has had the most and least impact.
Whilst the scheme is an undeniable success from
a take-up perspective, it is questionable whether
it has achieved its aim of addressing wider
affordability issues. The graphs adjacent clearly
show that the areas with the greatest take-up are
some of the more ‘affordable’ areas of the country,
REGIONS
The lack of affordable housing in London is
well documented, with this sector being ever
increasingly squeezed as sales prices and build
costs rise. Changes to the benefits cap and
reductions to Registered Provider rents have
made the provision of affordable housing even
more of a challenge, with the most common
tenures now being Shared Ownership and
Affordable Rent. These factors, coupled with
house building rates being at an historic low, are
having a considerable impact on those in need of
affordable housing.
The First Steps (to home ownership) website,
hosted by the Mayor of London, Boris Johnson,
sets out the options currently available to
Londoners, listing all properties currently
available to buy in London via the First
Steps Programme. The options available are
Shared Ownership - with a minimum purchase
requirement of 25% and rent payable on the
remaining share; Rent to Save – where a property
is rented for a period of up to five years for
By STEPHANIE EATON – Viability and Affordable Housing Consultancy, Carter Jonas
up to 80% of the market rent (with a savings
plan in place for a deposit for home ownership);
Help to Buy - where a minimum of 80% of the
property is purchased with a mortgage and
deposit (and the minimum deposit is equivalent
to 5% of the value of the property); Discount
Full Ownership – where a new home can be
bought from a specialist private developer at
a discount of 80% of the open market value
(these are primarily one bed apartments,
with prices capped at £231,000, regardless of
local values).
However, whilst these options represent the
‘affordable’ path to home ownership, they are
of limited use to those unable to save a deposit.
For London to retain key workers and those
who service the industries and businesses in the
capital, there is a clear need for truly affordable
housing and, perhaps, this can only be provided
by direct government intervention direct
national or local government intervention.
while conversely, the least active areas are those
known for having significant affordability issues.
Leading the way is Oxford, which is widely
considered to be the least affordable city outside
London, a position recently allocated to it in
Lloyds’ unaffordability ranking.
Critics of the scheme have also suggested that it
provides too much support to some local new
home markets and is artificially inflating prices.
Surprisingly, since the scheme was launched, all
new homes in Newcastle have been purchased
with the aid of the scheme. If we make the
reasonable assumption that a quarter of these
buyers would have been unable to make the
purchase without the scheme, it is clear that it
has had a considerable impact. With HTB EL
providing 25% or more of the buyers in nearly
half of all local New Homes markets in England,
the significance of the scheme in relation to
buyer demand is evident. This gives rise to the
question of the viability of development in some
areas once the scheme ends in 2021.
FOCUS

7. carterjonas.co.uk 7
Figure 5
Areas with the greatest HTB EL activity
Area Private Enterprise
New Homes
Constructed
Help-to-Buy
Equity Loan
Schemes
Percentage of the
Market that HTB
EL accounts for
Average Sold Price
(new homes)
Newcastle upon Tyne 460 460 100.00% £210,369
Blackpool UA 50 33 66.00% £131,408
Sefton 350 213 60.86% £172,580
Swale 490 297 60.61% £237,790
St. Helens 650 393 60.46% £187,299
Thurrock UA 610 360 59.02% £231,738
Cannock Chase 330 184 55.76% £214,686
Peterborough UA 1470 819 55.71% £187,422
Hyndburn 80 44 55.00% £99,281
Gloucester 890 484 54.38% £190,865
Areas with the least HTB EL activity (exc London)
Area Private Enterprise
New Homes
Constructed
Help-to-Buy
Equity Loan
Schemes
Percentage of the
Market that HTB
EL accounts for
Average Sold Price
(new homes)
Oxford 110 0 0.00% £342,593
Lewes 310 3 0.97% £296,866
Guildford 440 11 2.50% £607,024
Brighton and Hove UA 430 11 2.56% £386,023
Eastbourne 270 7 2.59% £206,496
Sevenoaks 230 8 3.48% £420,801
New Forest 280 13 4.64% £386,109
West Dorset 470 22 4.68% £267,029
West Somerset 210 10 4.76% £215,014
North Norfolk 520 25 4.81% £289,137
Source: Carter Jonas Research/Department for Communities and Local Government
Figure 4
New Home Construction
Completions – England (exc London)
Private Enterprise
Housing Association
or Local Authority
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
AS 2016
PROGRESSES,
WE EXPECT
DEVELOPERS
TO BECOME
EVER-MORE
RELIANT ON
THE OWNER-
OCCUPIER
MARKET.
HTB EL
Buyers deposit: 5%
Government loan: 20%
(40% in London)
Mortgage: 75% (55% in
London)
Eligibility
The property must be
New Build
The purchase price must
not exceed £600k
You must not own
another home
You must not let the
property out

8. © Carter Jonas 2016. The information given in this publication is believed to be correct at
the time of going to press. We do not however accept any liability for any decisions taken
following this report. We recommend that professional advice is taken.
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Heather Littlejohn
Partner, Head of London New Homes
020 7518 3255 / 07788 296 653
heather.littlejohn@carterjonas.co.uk
Carlo Nasti
Negotiator, London New Homes
020 7590 6691 / 07764 841081
carlo.nasti@carterjonas.co.uk
Mark Wood
Partner, Eastern New Homes
01223 403331 / 07711 078 857
mark.wood@carterjonas.co.uk
Lee Layton
Research Analyst
01604 608212 / 07768 308 737
lee.layton@carterjonas.co.uk
Marika Brundell
Associate, Eastern New Homes
01223 403330 / 07730 140 079
marika.brundell@carterjonas.co.uk
Darren Yates
Head of Research
020 7518 3343 / 07788 345 915
darren.yates@carterjonas.co.uk
Anne Haggas
Head of Northern New Homes
01423 707817 / 07818 522 884
anne.haggas@caterjonas.co.uk
Claire Johnson
Associate Partner, Head of Southern
New Homes
01865 404440 / 07584 470 919
claire.johnson@carterjonas.co.uk
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