New housing developments do not impact on surrounding house prices
A new study has shown that new house building in the UK has little discernible and consistent impact on local house price patterns.
The report by LSE London at the London School of Economics and Political Science and jointly commissioned by Barratt Developments, the largest house builder in the UK, and the NHBC Foundation, examined whether a new development will always reduce prices or reduce the rate of increase in prices in the immediately surrounding area.
Examining the impacts of eight recent residential Barratt developments on their local areas, the research concluded that prices did not decline as a result of development, although sometimes there may be some limited impact during construction. Once the developments were completed, the local areas generally moved with the market.
One of the most common concerns of home owners across the UK is that a new build residential development nearby will reduce property values in the local area. For many people their new home is their largest single investment.
The selected sites all involved fewer than 300 units and were substantially completed within the last five years. Spread across the South and Midlands these sites are typical of housing development outside city centres or wholly rural areas.
The aim was to exemplify ‘ordinary’ developments mainly on sites where there had been objections, some significant, at planning permission stage prior to development. Five sites were built on land with previously higher amenity value, and three were built on land that previously had lower amenity value including derelict industrial land.
Specifically, the research found that house price changes in the surrounding streets and the broader three or four digit postcode districts suggest that new developments may stabilise or even increase prices in the immediate areas once development is complete where the market is generally stable and rising. They also suggest that there is almost no evidence of
Longer term negative impacts.
For sites where a high level of opposition was experienced throughout the planning and construction processes, this opposition tended to decrease once the development is completed. In one case where there were high levels of opposition, at least half of all eventual purchasers of the new homes previously lived within five miles of the development.
‘Few would argue that the UK needs to build substantially more homes to avoid a housing crisis, but despite this, local opposition remains one of the main obstacles to achieving this,’ said Neil Smith, head of research and innovation at NHBC.
‘It is understandable that home owners will be anxious to protect their investment in their homes, and concerns about the negative effects of new developments have compounded the issue,’ he explained.
‘While there are clearly a number of factors affecting property values in specific areas, this research challenges the assumption that new build developments will adversely affect local house prices,’ he added.
Philip Barnes, group land and planning director at Barratt Developments Plc, acknowledged that one of the understandable fears of new development is that it might adversely affect existing house prices in a local area.
‘We were keen to understand this potential impact and with the NHBC Foundation jointly commissioned research by the London School of Economics. Whilst this is a small sample it is reassuring that new housing developments appear to have little discernible impact on local house price patterns, indeed in some areas can boost local market confidence,’ he added.