Planning matters

In the draft National Planning Policy Framework (NPPF) and associated draft Planning Practice Guidance (PPG) that were recently consulted on, there was a welcome, albeit brief, nod towards the benefits that new development can bring to a local area. The draft guidance states that local authorities should do more to publicise the local environmental improvements (e.g. to highways, open space and education) that developers make contributions towards. It is suggested that this could be achieved through on-site signage or even designing websites that help to inform the public about exactly what new developments are contributing to their local areas. From a development industry perspective, anything that helps to encourage public support for new development is welcome.

 

One issue, however, that is persistently absent in terms of helping achieve widespread public support is the impact of new development - particularly new housing - on local house prices. Most people have an understanding of the factors that can affect house prices; it is well known that the location of a nearby station, or a school with an ‘Outstanding’ Ofsted rating can increase the desirability of an area and can, over time, increase property values. New housing development, by contrast, is often cited as a factor that will adversely affect the value of nearby properties and local support for new housing development can weaken as a result. Despite this not being a material consideration in planning decision-making, it is still of course a concern for local residents, given that a house, for many, is likely to represent one of their largest financial outlays and investments. 

 

Clearly, there is a need to improve understanding of how 'microscale' factors affect house prices at a local area level. The challenge associated with this is in distinguishing the effects on house prices that are directly attributable to any one particular factor from a range of other complex factors. This problem is felt more acutely at a local level, where a reduction in scale coincides with an increase in the significance of factors that are location-specific. 

 

At Lichfields, we have carried out research that has adopted an evidence-based approach to this topic, by examining the ‘house price effects’ across 26 new housing sites in the North East of England. Sites sampled ranged in terms of their size, density, character, relationship to existing urban form, previous use classification and of course the surrounding housing market strength. The principal aim of the research was to develop a simple, yet robust methodology that quantifies house price change within a local area. Our Insight Focus outlines the approach taken and describes the results in more detail.

 

What we have found is that there is no strong evidence to suggest that adverse effects on property values took place in areas surrounding new housing development. In fact, when aggregated across all sites, a positive price effect of around 4% was determined. The methodology for measuring house price change, combined with a highly-localised sampling strategy, gave us a degree of confidence to conclude that new local housebuilding is highly likely to have a major impact on the observed positive price effects. In fact all seven of the local authorities sampled demonstrated positive price effects, with County Durham, North Tyneside and South Tyneside performing well in this respect. The results also suggested that greenfield and rural-urban fringe sites performed marginally better than brownfield and urban sites. Within the context of the North East housing market, mid-range value areas performed the best.    

 

In almost all of the 26 new housing sites the point after which the first unit sold coincided with an increase in housing market activity (number of transactions) that was independent of the new build sales. This suggests that new housing can actually re-invigorate a local housing market, possibly by triggering a displacement effect. This could also help to explain the mechanism by which local area house prices may rise as a result of new housing development in the area.  

 

Whilst we are keen to acknowledge the limitations of this research - it’s relatively narrow geographical focus and moderate sample size being two - we also recognise the potential for this type of study to be carried out in other regions of the UK. Our research contributes to an improved understanding of local area level house price change and if conducted in other areas too, could be a way of reassuring local residents that new homes in their area will not adversely affect their house price. This could in turn support more positive public engagement locally, when planning for new homes.