Research article

Strong growth, new challenges

Hertfordshire has seen strong house price growth, driven both by its own economy, and excellent links to London. A lack of supply is leading to stretched affordability

Hertfordshire’s thriving economy has seen population growth of 11.9% over the past 10 years, compared to 8.2% nationally, and the number of households in the county is projected to increase by a further 15.5% by 2030. Employers are drawn to the region by a strong workforce with high economic participation. 35% of residents are qualified to degree level.

The county is home to leading companies in science and pharmaceuticals, benefiting from good connections to Cambridge. GlaxoSmithKline and Airbus have research facilities at sites in Stevenage and Ware, employing over 2,700 people.

On a smaller scale, Stevenage Bioscience Catalyst and BioPark in Welwyn Garden City have proven to be excellent locations for new and growing biopharmaceutical research and technology businesses. In the south west of the county, the film studios at Elstree and Leavesden Studios draw interest and investment from across the globe.

Links with the capital are also good, attracting London commuters seeking more space and a balance between city and country life. 25.9% of the population of Hertfordshire work in London. London commuters and Hertfordshire’s own economy contribute to one of the strongest housing markets in the country.

Additional demand is likely to come in the future from Essex, where Stansted, the UK’s fastest growing airport, and the relocation of Public Health England to Harlow are likely to boost economic growth.

Housing market

Hertfordshire’s housing market has seen strong growth from 2009, driven by the varied local economy, and strong links to the capital. Prices are currently 48.9% above their previous peak in 2008, according to Land Registry data, and house prices have grown 11.7% across the county over the past year, compared to 7.7% nationally.

However, the highest value areas which had the strongest price growth after the 2008 recession have in recent months seen the market slowing, with values in St Albans growing by only 1% in the last six months, compared to growth of over 5% in the same period in North Hertfordshire.

The highest residential values in the past year have been achieved in the rural areas around Hemel Hempstead, St Albans and Harpenden, where in the year to June 2017 average transaction values were at least £600,000, and in some areas exceeded £800,000. There are still some pockets of the county where average transaction values remain around £200,000, such as Hitchin and Stevenage.

Figure 1

FIGURE 1Average transaction values in Hertfordshire Year to June 2017

Source: kamaco Research

Affordability pressures

There are, however, significant challenges facing the region if it is to continue this high level of growth.

The lack of supply has contributed to rising prices. 3,500 new homes were completed across Hertfordshire in 2015-16. This is over 2,000 homes fewer than the objectively assessed need figure for the county. However, this represents an improvement on the period of 2012-2015, which saw fewer than 3,000 homes delivered in the county each year.

Affordability pressures are becoming an increasing problem. Only Stevenage has a median income to median house price ratio that is below the England average. In St Albans, median house prices are over 16 times median incomes, the second highest of any local authority outside London.

The problem will get worse if local authorities and developers cannot produce major housing development to meet the county’s need. This could hinder economic growth, as affordability pressures will prevent people from moving to the county.

Figure 2

FIGURE 2Housing affordability ratio

Source: DCLG

Future opportunities

The county is not dominated by one city, but is instead has a network of smaller urban areas. The new towns of Hatfield, Welwyn Garden City, Stevenage and Hemel Hempstead are home to over a quarter of the county’s population. These towns are well connected, but are in need of town centre regeneration.

Elsewhere, 53% of the land in the county is designated as Green Belt, which places severe limits on the amount of land able to come forward for development. The less constrained land in the north of the county does not benefit from the same quality of transport links, placing additional infrastructure burdens on developers.

The tension between protecting the Green Belt and providing enough land for residential development to meet need will define the plan making process for many local authorities.

Infrastructure

There are many opportunities for increased housing delivery if the right strategies can be put in place. The Hertfordshire Local Enterprise Partnership has identified the three major radial corridors from London, (M1, A1(M) and M11) as areas for infrastructure driven growth, which could in turn drive more residential development.

Crossrail 2 has the potential to drive further growth as it will offer an alternative route into central London from the south east of the county. Transport for London estimates Crossrail 2 has the potential to aid the delivery of over 200,000 homes along the line, with around half of the growth potential focused in the northern part of the route.

Although Crossrail 2 is unlikely to be delivered until the 2030s, the proposed four-tracking of the line from Broxbourne into Liverpool Street will increase the speed and frequency of services, and could act as an earlier catalyst to unlock sites.

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Simon Smith

Simon Smith

Senior Director
Research & Consultancy

kamaco Two Exchange Square

+852 2842 4573

 

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