Week commencing 16 January 2017

In today's bulletin

• UK home value rises to record £6.79 trillion in 2016
• Quarter of a million of cheapest British homes to disappear

• Rail franchise details announced
• Wave power requires rethink to overcome cost barrier

Property, Planning and Regeneration

Fewer people move home as house prices reach record high

The number of people moving home is down four per cent from 2015 to 354,000 – the first decline seen in five years. Although the figure has grown 12 per cent since the housing downturn in 2009, it is still 50 per cent lower than the total of 712,000 ten years ago. Rising house prices could be responsible for this downturn, with the average house price paid growing seven per cent last year to a record high. Since 2009, housing prices in London have grown 75 per cent.
This means that homemovers are paying larger deposits, up by 33 per cent since 2009. Due to rising prices, we are also seeing mortgage terms being extended, with the number of people opting for a term of between twenty five and thirty five years increasing. However, mortgage costs as a proportion of homemovers’ disposable income are down, just below the long-term average since 1983 at 38 per cent.

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UK home value rises to record £6.79 trillion in 2016

The value of British housing grew by £491 billion last year, analysis from Savills has shown. Privately held housing passed the £5 trillion mark for the first time, with the South East outperforming London over the period. However, the analysis warns that growth has not brought universal benefits, with
prices across parts of the North falling and still struggling to recover to their pre-financial crisis peak. The new figures underline concerns for the prospects of future generations in the housing market, with owner-occupiers and private landlords benefitting most from price growth.

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Residential sales stutter in December

Housing sales faltered in December, putting a stop to the momentum that had seemed to be building during the last few months of 2016, according to the latest RICS UK Residential Market Survey. The month saw a marginal increase in new buyer enquiries while new instructions failed to substantially increase for the tenth consecutive month, leading to a noticeable moderation
in survey respondents’ sales expectations in the near term. House prices in central London continued to fall but rose in other regions. In the lettings market, a slight rise in tenant demand was not matched by new landlord instructions, with the difference between demand and supply creating upward pressure on rental prices.

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Quarter of a million of cheapest British homes to disappear

250,000 of the cheapest homes in the rental market could be lost in the eight year period 2012-2020, figures from the Chartered Institute of Housing suggest. This follows revelations last week that homes available at social rent fell by more than 120,000 over the four year period to 2016 – despite
the construction of 44,600 new homes for this purpose over the same period. CIH predicts a drastic shortage of cheap rental homes in the next four years as providers look to boost their income from these properties by upgrading them to draw in higher rents or selling under the right to buy.

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Encouraging SME developers will boost housing numbers, HBF argues

Reforms that could aid the establishment and growth of SME housebuilders have been proposed by the Home Builders Federation (HBF) in a new report published on 15 January. Reversing the decline of small housebuilders identifies planning, financial and bureaucratic obstacles to small or medium-sized developers and proposes changes that could address them. These include changing the definition of small sites, a ‘Help to Plan’ initiative to
provide technical and planning support to small business, and cutting red tape which bars small housebuilding firms from accessing certain government funding schemes. The report also details how SME housebuilders can capitalise on the UK’s departure from the European Union. The HBF believes that these changes could boost housebuilding and provide thousands of new homes each year.

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Real estate industry ‘better prepared’ for political and economic shocks post 2007

Behavioural changes in the UK real estate industry in the wake of the 2007/8 financial crisis has improved its ability to deal with political and economic shocks in the future, BNP Paribas’ Real Estate Research division has claimed. The division’s new Cycology report, published on 13 January, found that industry indicators and fundamentals, including capital flows, political trends and debt, are now used to inform property investors of industry cycles and
impact on pricing. The research also found that investors did not expect the inauguration of President Trump or the beginning of negotiations over Britain’s exit from the EU to significantly damage UK property prices, which they believed would be protected by currency movements and London’s “safe-haven” status.

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Transport

Rail franchise details announced

The Department for Transport (DfT) released further details of the West Coast Partnership rail franchise on 19 January. Starting in 2019, the company operating the franchise will be responsible for continuing to run current Inter City West Coast Services, as well as progressing HS2 through design and initial
delivery in 2026. The government prospectus, which gives details to those companies considering involvement with the franchise, lays out “the route to high speed rail”.

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Replace congestion charge as the cost of traffic rises

Road pricing should replace the congestion charge and be the eventual goal for London Mayor, Sadiq Khan, claims ‘London Stalling’, a report by the London Assembly Transport Committee. Released on 19 January, the study shows that the annual cost of traffic delays to London has risen by thirty per cent in the past two years, totalling £5.5 billion. The committee recommends
a model of charging people for using roads, focused on areas of congestion when the roads are most busy. This would involve scrapping the daily flat rate in favour of a pricing structure which charges more at peak times and for longer stays in the congestion zone. The report also suggests rolling back a restriction on night-time deliveries and rethinking ‘click and collect’ schemes at tube stations.

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TfL revamps online planning tool to prepare for London’s future transport challenges

Transport for London’s (TfL) online planning tool has been given an upgrade to assist planners as they design housing and business developments fit for the future. WebCAT shows the connectivity of any area of the city in terms of public transport, and the newest refreshment of the tool sees it include a wealth of new data, such as the number of people, jobs, town centres and
other factors within specified travel bands. Heat-map data visualisation now indicates how well-connected an area is in terms of cycling infrastructure and other forms of transport, with journey times provided for various transport options.

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Energy and environment

Wave power requires rethink to overcome cost barrier

Wave energy remains up to ten times more expensive than other sources of renewable and low carbon energy in terms of cost, the Energy Technologies Institute (ETI) has claimed. Setting out its priorities for marine energy on 16 January, the group advocated the prioritisation of tidal stream power,
which it believes can compete on cost with alternative energy sources, and is demanding the government supports the MeyGen project, a tidal array off the north coast of Scotland which could expand to up to 269 underwater turbines.

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Failure of second Carbon Capture and Storage competition offers lessons for government

The Department for Business, Energy and Industrial Strategy (BEIS) has again failed to achieve value in running its second competition for projects in Carbon Capture Storage (CCS) to receive financial backing. The National Audit Office (NAO) reported on 20 January that, whilst the Department could gain valuable knowledge about the commercial potential of and technology involved in CCS projects from the exercise, there were critical flaws in the organisation of this competition.
These included the lack of an agreement with HM Treasury over how much funding would be available to successful entries, an oversight which saw the removal of the £1 billion initially pledged by HMT to back these projects, prompting BEIS to cancel the entire competition. A similar competition, at a cost of £68m, was also cancelled by the Department back in 2011.

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