our view on

'resilient residential' cambridge

The Cambridge residential market continues to be one of the strongest in the country. Reflecting an extraordinarily resilient and expanding economy, the Cambridge housing sector has experienced unprecedented growth in recent years. Our latest research expects the market to continue expanding apace in the years ahead.

As investment continues to flow into the city and development activity increases on the back of some of the best economic indicators in the UK, Bidwells have undertaken a forensic analysis of the Cambridge and South Cambridgeshire housing market since the turn of the century. Taking into account a full economic and property cycle, the Cambridge numbers are impressive.

In the period 2000-15, a total of 72,700 residential sales were recorded in Cambridge and South Cambs. This figure was made up of 84% in property resales and 16% - equating to 11,500 units – in open market, new build properties (excluding units built for rent or owner occupation). New construction has accelerated over the past 3-4 years and the area’s housing stock is now around 20% larger than it was in 2001.

In Cambridge city, there were 29,500 residential sales in the 15 years to the end of 2015, equating to a top-to-bottom property cycle annual average of just under 2,000 properties. Reflecting site availability and planning constraints, only 15% of sales since the turn of the century comprise new build properties. 

Just under 4,600 new homes have been sold in the City since 2000, producing another complete cycle annual average of just over 300 properties across the City. For reference, this compares to a market like Milton Keynes where an average of just 1,500 new homes have reached the market each year since 2000.

Since 2008, new home sales have taken an increasing share of overall transactions as new developments compensate for a significant fall in resale volumes. This decline is likely to be a result of limited finance and the transfer of a significant proportion of stock to the private rented sector, effectively removing it from the open market pool of housing. Without new developments, most especially to the south of the City, the robust price growth witnessed in the Cambridge market in recent years would have been even more pronounced.

At September 2016, average house prices across all property types in Cambridge stood at £446,796 according to Land Registry. This represents a 230% uplift on 2000. Prices in Cambridge are presently running at just over twice the national average.

With an average of only around 300 new properties sold each year against a total city housing stock exceeding 51,000 units, it is easy to see why Cambridge residential prices have escalated dramatically over the past 10-15 years.


With land in increasingly short supply in Cambridge, it would be expected that growth would have decanted to South Cambs which encompasses the City district. However, this has not as yet occurred on the scale anticipated. In South Cambs, total sales of 43,250 were recorded in the period 2000-15, producing a full cycle annual average turnover of 2,900 units. However, whilst volumes in South Cambs are larger across a wider area, only 16% of total sales (6,950 units) since 2000 have comprised new builds. This represents an average annual new build transaction rate of a little under 500 units per annum.

The total size of the Cambridge area residential sector, as reflected in new build sales, has expanded by an average of 1-2% each year since the turn of the century, providing compelling impetus to the development and investment market. The remarkable dynamics of the Cambridge market are highlighted by the alignment between population growth, economic performance and residential sector expansion. 

With only around 300 new properties sold each year on average against a total city housing stock exceeding 51,000 units, it is easy to see why Cambridge residential prices have escalated dramatically over the past 10-15 years.
Whilst the Cambridge housing stock has expanded by around 20% since 2000, the population of Cambridge and South Cambs has risen by just under 21% - to just over 290,000. Rapid demographic growth is fuelling strong housing demand and new construction.

 

20%

Increase in Cambridge housing stock since 2001

43,250

Total sales in South Cambs from 2000-2015

21%

Rise in the Cambridge population since 2000

 

 

 

 

 

 

 

The latest Cebr/Irwin Mitchell City Tracker report shows Cambridge as the UK’s fastest growing economy in Q2 2016 across a range of economic measures with a Gross Value Added (GVA) component of 2.7%.  In 2017, the economy of Cambridge is forecast to expand more rapidly than any other UK city, including London.  A strong economy inevitably mirrors an expanding labour market, adding further pressure to the residential sector.  City Council forecasts suggest that the working age population of both the City and the surrounding district will have grown by more than 12% in each case in the ten years to 2021.

Since the turn of the century, the Cambridge area population and economy have expanded rapidly and this has underscored rapid growth in residential development and investment.

Looking to the future, with much of the available and developable land for residential accommodation within the Cambridge City boundary now either built out or committed, new construction growth will inevitably place increasing emphasis on the City fringes and South Cambs.  This is reflected in the County Council’s population forecasts.

Whilst the population of Cambridge City is expected to grow by just over 7% in the next five years to 147,000, it is likely to expand to only 151,000 in the following ten years (to 2031) as growth levels off markedly in the face of physical constraints to new development.

In contrast, the population of South Cambs is expected to also grow by 7% between 2016 and 2021.  However, it is then expected to grow by a further and remarkable 15% in the next ten years (to 2031) to just under 190,000.  This represents one of the fastest projected growth rates in the UK.  Furthermore, many commentators, including Bidwells, have suggested that Cambs County Council projections are likely to prove understated given the City’s exceptional economic growth and productivity trajectory.

In order to sustain economic and employment growth, development volumes in South Cambs will have to rise significantly from their current volumes over the next decade as the Cambridge market becomes increasingly reliant on its hinterland locality to generate housing in response to need.

 

Overall, a prosperous economy, strong demand and increasingly constrained supply in Cambridge City, following many years of only modest new build sales, will continue to support an active market in infill developments with rising prices across all property types. In South Cambs, new build developments are likely to increase significantly on the back of very strong demographics and growth decanted from the City.

Whilst short term price movements will inevitably ebb and flow in response to economic signals, policy changes and political machinations, the structural prospects for residential development and investment in and around Cambridge remain very strong for many years to come. This is the first of several thought pieces on the Cambridge housing market – please do let us know if there are areas of particular interest to you.

For more information, please contact

Geoff Leyland, Partner, Residential Development

 

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