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New report from Hamptons International looks at concentration of pent-up demand around the country

The East and East Midlands are the two regions in England which have the most potential in the current housing market recovery according to a new report from Hamptons International Research.  According to the study, which examined the amount of pent-up demand which has built up since 2008 and the potential for this to be released, the East and East Midlands come out top of the rankings.

The report, entitled ‘Where Did Everybody Go?’ reveals that the amount of pent up demand for housing in England could be as much as 350,000 households*.  By overlaying a series of local economic, housing market and demographic indicators including income, unemployment, migration, rates of house building and affordability, Hamptons International Research has identified which parts of England have the biggest potential for recovery and therefore where pent-up demand is more likely to be relieved first.

At a time when the housing market and economic recoveries are gathering momentum, the report helps to shed light on which areas are relatively stronger. Of the regions, the East and the East Midlands top the list.  Higher than average income, low unemployment and an inflow of people work in favour of the East, while above average income growth since 2008 coupled with relatively good affordability supports the East Midlands. By contrast, Yorkshire and Humberside faces higher unemployment and low incomes, this coupled with out-migration, reducing the need for housing in the area, pushed this region to the bottom of the rankings.

Region

Potential Housing Market Buoyancy Ranking

Income Growth over period

Income as % England Avg

Unemp
loyment

House Price: Income Ratio

Migration: Net inflow as % 2008 households

Building Shortfall: Avg annual building shortfall, 000s

East=

1=

6.1%

94%

7.9%

5.9

7.2%

3.5

East Midlands =

1=

5.9%

104%

6.5%

7.7

1.7%

1.2

South East

3

4.7%

108%

6.2%

9.0

5.7%

9.4

South West

4

3.9%

92%

5.8%

8.6

7.2%

1.9

London

5

2.5%

126%

8.9%

14.2

-12.4%

11.9

West Midlands

6

4.8%

93%

9.2%

6.4

-2.0%

9.7

North West

7

3.8%

93%

8.2%

5.3

-1.8%

11.3

North East

8

9.3%

90%

10.0%

4.8

-1.8%

2.3

Yorks & Humber

9

3.7%

91%

9.2%

5.8

-2.2%

1.8

England

-

4.9%

 

7.8%

7.5

-

52.9


Fionnuala Earley, Residential Research Director at Hamptons International, commented on the findings: “We know that various factors have prevented households from forming since the crash in 2008, but their aspirations didn’t go away. As a result a build up of up to 350,000 households is waiting in the wings. Not all will be in a position to set up home, but now that the economic and housing market recoveries are on track increasing numbers will be in a position to do so, either in the owner occupied or rental sector.

“Looking at economic, housing market and demographic factors, our research sheds light on which parts of the country have the most potential to see those demand pressures realised. Interestingly it isn’t London and the South East at the top of the list. The interplay between all of the different factors means that the areas outside have greater capacity for growth.”

Applying the same methodology at a more local level, Hamptons International Research has identified a list of the local areas** which have more potential for faster recovery in housing market activity and prices.  Rushcliffe in the East Midlands and Runnymede and Elmbridge, both in Surrey all have faced a significant shortfall of building and have seen relatively large rates of in-migration which put pressure on the demand for housing.  But a lack of new building isn’t always a cause of demand pressures. Building in South Cambridgeshire and St Albans for example, has been relatively healthy.  In these areas, the buoyancy of the local economies has pushed them up the rankings of where demand pressures will be strongest.

Top 10 areas of Pent-up Demand

Area

Region

Potential Housing Market Buoyancy Ranking

Income Growth over period

Income as % England Avg

Unemploy
ment

House Price: Income Ratio

Migra
tion: Net inflow as % 2008 house
holds

Building Shortfall: Avg annual building shortfall, 000s

Rushcliffe

East Midlands

1

19%

116%

4.6

6.6

10%

-0.3

Runnymede

South East

2

9%

118%

4.1

14.9

7%

-0.3

Elmbridge

South East

3

-18%

122%

3.9

6.4

9%

-0.4

Bracknell Forest

South East

4

7%

123%

4.7

6.4

4%

-0.3

Ryedale

Yorkshire and Humber

5

15%

87%

4.4

11.4

10%

-0.2

Kingston
upon Thames

London

6

13%

145%

5.4

12.3

-7%

-0.4

Brentwood

East of England

7

6%

143%

3.8

6.9

13%

0.1

South
Cambrid
geshire

East of England

8

12%

123%

4.0

7.5

16%

0.3

Bedford

East of England

9

11%

107%

7.8

6.3

7%

-0.5

St Albans

East of England

10

16%

148%

5.0

7.3

9%

-0.2


Fionnuala Earley concluded: “It’s important to remember however, that the existence of pent-up demand doesn’t mean that it will all hit the market at once now the economic climate is better. Affordability acts as a brake, which already affects the potential of the most expensive parts of the country to grow further.  If prices and/or rents grow too fast it will quickly affect the risks and affordability of setting up home and dampen the demand pressures evident today.”

*Government census data estimates there are 22.5million households in England in 2013 which is around two million more than 10 years earlier but 30 per cent fewer than expected in 2008.  This means an average 70,000 fewer households set up home in England each year since 2008 (or 350,000 since 2008).

**Based on local authorities

 

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