Regional Market Report
– The South East

The People

Analysing population density, migration patterns, median age, and income can help you to make data-driven decisions about the type of properties that the local communities most need. We’ve drilled into some of the recent data from the Office of National Statistics so that you don’t have to.

Population density

Census data for 2021 puts the South East’s population at 9,280,210 – an increase from the ONS’s 2020 mid-year population estimate of 9,217,265.

If we look back even further, we see a 7.25% population increase over a 10-year period, up from 8,652,784 in 2011. This is higher than the national increase for the same period which was 6.37%.

This makes the South East the most populous region in the UK, even higher than London itself (8,799,730), and the third most densely populated region with 487 people per sq km.

If we look at the estimated population projections for the South East, these figures are set to climb even higher. In 2031, there are expected to be 9,623,462 people living in the region. This is an even more significant increase than we’ve seen in the past 10 years, with growth accelerating 4 percentage points to 11.22%.

However, there is still a lot of disparity within the region. For example, outside of London, Portsmouth has the second highest population density in all of the UK and a projected 10-year population growth of 7.2% to 222,978. Noteworthy as this is five times the growth from 2011-2021, which was a relatively restrained 1.3%. Growing demand in the area could present opportunities for developers who are willing to develop in existing dense urban areas – more on this later.

When comparing this to more sparsely populated areas like Chichester (158.4 people per sq km) and West Oxfordshire (161.2 people per sq km), a very different pattern emerges. West Oxfordshire is the fifth largest local authority in the region in terms of square kilometres, so theoretically more land to go after right? Firstly, 37% of the Council Area is affected by Green Belt, SSSI, or AONB, and secondly, the data suggest that demand may not be as strong in this part of the region in the coming decade. In a reversal of what we saw in Portsmouth, the rate of population growth is slowing in West Oxfordshire – with a growth of only 1.1% estimated between 2021-2031.

In terms of projected population, we see some interesting changes anticipated within the South East, for example in both Dover and Oxford. Dover is expected to see the largest population increase in the South East (+13.1%) and Oxford is on track to have the biggest decrease in population (-8%).

Migration patterns

2021 ONS data shows that net internal migration for the South East was +7,623 persons – meaning that the population increased by a fraction of a percent – 0.08% in fact – as a result of people moving to the South East from other local authorities in the UK. The impact of net international migration is a hundred times less, resulting in only a population change of +77 persons.

This is a pattern we see repeated across the region as the total population change as a result of internal migration is more significant (either positive or negative net migration) than international migration is.

Buckinghamshire had the highest net internal migration of any local authority in the region at +1,339 persons, but the total population was barely impacted by people moving into the area from outside of the UK (+12 persons).

At the opposite end of the spectrum, we have Oxford, which saw its population drop as a result of net internal migration – with a change of -2,204 persons. This could be a result of the poor (bottom quartile) student retention rates that Oxford experiences. Historically, it has been as low as only 20% of students remaining in the city after graduating. Affordability could be the key driving factor – Oxford’s income-to-house price ratio (taking the median income and comparing it to the median house price) is 8.6%, which is comparable to London’s 7.7%.

Age

Age can be a useful indicator of the kind of housing requirements for people living in the area. A younger median age could signal that more apartments or first-time homes are needed. Whereas, the reverse may mean that more senior living properties will be required.

Urban hubs typically have a lower median age as young people are drawn there by job opportunities and the faster pace of life. After the South West, the South East has the highest median age in England at 41.8. Since 2011, this figure has crept up by 1.2 years from 40.6. The proximity to London makes the South East an appealing region for families looking for more green space whilst still remaining within a commutable distance of the capital.

Rother has the highest median age (53.7) in the South East and is part of the UK and Global Networks of Age-Friendly Communities. The coastal setting and commitment to providing welcoming spaces for their senior residents could be part of the lure for the older demographic. Since 2011, the median age in Rother has increased by 3.22 years.

Oxford on the other hand, as a university city, has a much lower median age of 31.9. However, as we saw above there have also been issues with retaining the student community after graduation. In fact, the median age has increased by 1.74 years since 2011 showing that the population there is getting older. There could be an opportunity here to provide more Build to Rent properties for the student and post-graduate communities to increase the retention rate.

Dartford is the only local authority in the South East with a population that is getting younger. The difference in median age is marginal, decreasing from 37.67 in 2011 to 37.17 in 2021. It’s also worth noting that Dartford experienced a 19.6% population increase from 2011 to 2021, and from the decrease in median age it seems that more people are moving into the area. As an outlier from the trend we are seeing across the region, it will be interesting to see what happens here in the future.

Income

Adding income data into the demographic mix can help provide more detail on the type of housing that is needed here – and whether it is likely to be affordable for people already living in the area.

London has the highest median income in the UK, but the South East is close behind with £35,658 reported as the median average earnings in the region for full-time work in 2022. In 2012, this figure sat at £29,461 – a 21% increase over a 10-year period.

Within the South East, Waverley has the highest median income for 2022 in the South East at £44,657 – up from £36,938 in 2012 (20.9% increase). It also has some of the highest house prices in the region as we’ll see later in the report.

Hastings had the lowest median income at £28,667 but has seen a significant increase of 31.5% in the last 10 years.

Taking a shorter view, both Epsom and Ewell, and Dartford have seen large annual percentage changes in median income in just the last year (17.5% and 14% respectively). This paints an even more interesting picture of Dartford as the shifts in both age and income indicate that the demographic landscape of the local authority is changing, and bringing with it the potential for new housing needs.

The Planning System

The UK's planning system is multi-faceted and there are many aspects that developers need to be aware of when operating in a specific region. In this section, we delve into constraints, housing delivery, and policy changes.

Local Plan status

The Local Plan is supposed to be the cornerstone of the English planning system.

Local authorities are supposed to prepare a cohesive and comprehensive plan for their area. It should provide for the housing needs (and every other kind of need) expected within a fifteen-year plan period; they’re also supposed to review these plans every five years to ensure that they stay up to date.

According to the analysis that we’ve undertaken, less than 30% of local authorities in the South East of England currently have a Local Plan that was adopted less than five years ago in place. Around 42% of councils in the south east are relying on policies that are older than five years - leaving themselves open to the risk of planning application refusals being overturned by the Planning Inspectorate on appeal.

Although some councils are working towards the preparation and adoption of a new Local Plan, only around 14% of Councils in the South East are still actively working towards this goal, with 17% of Councils having actively stopped, or at least significantly delayed, the preparation of a Local Plan in the last year.

Green Belt and other constraints

Much of the tension around plan making, and indeed planning applications, felt in the South East is related to the Green Belt and whether sites should be released from this designation to allow more houses to be built where people want to live.

It is an emotive and often-politicised issue. The Green Belt is one of the most talked about, but least understood, aspects of the English planning system. Far from the rolling natural wilderness of the imagination, the Green Belt is separate from any ecological or biodiversity value and is simply a policy in place to prevent urban sprawl. Development in the Green Belt cannot affect the ‘openness’ of this area and this usually rules out development for housing.

The South East is significantly affected by London’s Metropolitan Green Belt, 16% of the total area of the wider region is located within the Green Belt. When you add in the impact of Areas of Outstanding Natural Beauty (AONBs), National Parks, and Sites of Special Scientific Interest (SSSIs) (together 40%), which also act to suppress or prevent residential development, a total of 49.6% of the South East region is ruled out for residential development.

On top of these constraints, the development industry in the South East is affected by the effective moratorium on development caused by Nutrient Neutrality requirements, including in the Solent and Kent. Plus Water Neutrality requirements in and around Horsham. These issues are severely affecting the development industry, despite being mainly caused not by housing but by years of under-investment in our water infrastructure.

Within the South East, the Councils most severely affected by Nutrient Neutrality are Eastleigh, Southampton, and Test Valley – all of which are affected by these restrictions across their entire area. Fareham, Havant, Gosport, Winchester, Portsmouth, New Forest, and Isle of Wight Council Areas are all also affected on over 90% of their total area. In total 22.8% of the South East is affected by Nutrient Neutrality restrictions.

Addressing Nutrient Neutrality is a complex and land-hungry issue. Although some developers are leading the way in securing approval for nutrient-neutral developments, the changes to the NPPF that are being considered may make it more difficult to find appropriate offsetting sites.

Water Neutrality is more locally restricted - focused on Horsham, Chichester, and Crawley - but the impacts are more severe with few obvious solutions to this development restriction in the short term. Although the Water Neutrality restrictions only affect just over 5% of the region as a whole, practically the whole of Horsham is affected, along with around half of Chichester and half of Crawley.

Planning applications

The current politicisation of planning, particularly in areas that are also affected by Green Belt policy, is leading to delays and unnecessary expense. Democracy, being at the heart of planning, means that planning decisions are made by local politicians on the advice of their professional officers. However, when the politicians ignore their officers’ advice and refuse planning permission in the face of a recommendation for approval it can lead to months of delays for applicants, and high legal fees for Councils.

Focussing on the South East, in the last quarter of 2022/23 Wealden Council was faced with legal fees of nearly £500,000 to defend their Members’ indefensible decisions at appeal. Indeed 30% of all appeals in Wealden have been allowed over the last five years.

It’s a similar situation in Brighton and Hove (35% allowed), Eastbourne (38% allowed), and Winchester (39% allowed). Although the situation is not universally this bad (only 13% allowed in Reading and 12% in Southampton), appeals in the South East region are allowed at an average rate of 24%, which means that nearly a quarter of applications are approved by the Planning Inspectors in the face of local refusal or inaction. This demonstrates a strong influence of the NIMBY (not in my back yard), or even the BANANA (Build Absolutely Nothing Anywhere Near Anything) groups in local politics.

Housing delivery

So, despite all this political upheaval in plan making and decision taking, are the local councils in the South East delivering the houses that the area needs? The 2021 Housing Delivery Test data, which was released by DHLUC last year paints an inconsistent picture across the region.

Councils like Mole Valley (70%), Worthing (35%), and Eastbourne (32%) are consistently failing to deliver the housing that their future population needs, meanwhile other areas are contributing a great deal. West Oxfordshire (195%), Vale of White Horse (195%), and Crawley (406%) are smashing their housing targets. Overall, the Government’s Housing Delivery Test shows that the South East is delivering 110% of its housing need, but is this delivery in the right place, and how is this affecting the housing market? More on this later.

Policy changes

In December 2022, the Government released a range of changes to the current national planning policy (the NPPF), as well as a prospectus outlining further policy changes that will come in 2023.

Although these changes are significant enough to warrant an update of their own (and in fact, that is currently in process) among the most significant changes proposed within this update relate to the protections afforded to Green Belt.

Currently, local unmet housing need can be used as part of the ‘exceptional circumstances’ that can allow Green Belt to be released from protection as part of a Local Plan review, or as part of the ‘very special circumstances’ to allow protected Green Belt to be built on as part of a (usually speculative) development. The latter usually takes place during an appeal and in situations where local policies are out of date or where a five-year land supply cannot be demonstrated (note the situation in Wealden outlined above).

The changes proposed to the NPPF make it explicit that Green Belt does not have to be reviewed to allow housing targets to be met, it also protects Councils from speculative development in cases where they do not have a five-year land supply – if their Local Plan is less than five years old. These changes will come into effect immediately upon publication of the new NPPF, so we may see appeal wins drop off a cliff in the second quarter of 2023.

Proposed policy changes (including the NPPF change, but also the White Paper and the Levelling Up and Regeneration Bill) have also had an immediate effect on Local Plan progress in the South East where twelve local councils have delayed or withdrawn work on their local plan over the last year. Together these areas are required by the Standard Method to deliver 10,768 houses per year. Mole Valley Council, for example, recently resolved to snatch back its Local Plan from the jaws of adoption to remove all the previously assessed Green Belt allocations.

These changes will have an impact on the housing delivery statistics for 2023 and beyond - we will keep tracking this.

Alongside this change to the level of protection afforded to the Green Belt, the NPPF changes also protect councils from housing delivery where doing so would require density that is out of character with the surrounding area - so no densification of existing urban areas near to services and transportation either. They also propose to offer more protection to Best and Most Versatile (BMV) agricultural land, meaning that it may become more difficult to find the large sites necessary for Nutrient Neutrality or Biodiversity offsetting as sites are protected in the name of food security.

On top of all this, the long-awaited Biodiversity Net Gain requirements brought in by the Environment Act, are due to kick in in November 2023. This may bring further delays as developers battle it out over offset sites that may be necessary to make larger green-field sites deliver the required 10% uplift in biodiversity. In light of all this, it will be very interesting to see how the Housing Delivery numbers change over the coming months.

The Housing Market

The South East has some of the most expensive house prices in England and is a competitive market for developers. We take a look at average house prices and the new-build premium – and how the housing market is impacted by demographics and the planning system.

Average house prices

Despite an already-high baseline for properties in the South East, there’s been a significant increase in average house prices in some local authorities in the region. From November 2021 to November 2022 the median price of houses increased by 10% to £402,466 – close to the national average of 10.9% in England.

Out of the local authorities in the South East, Elmbridge has the highest house prices by a significant margin (£740,435), seeing an 8.9% increase since November 2021. Its proximity to London, as well as an abundance of green spaces, makes it a desirable location for people with larger budgets.

There is, however, a wide range of prices across the region. Southampton’s average property prices were nearly a third less than those in Elmbridge at £251,526 – an increase of 8.7% from the previous year.

Rother saw the largest percentage increase in average house prices increasing 16.6% from November 2021 – £338,903 to £395,163. It’s interesting to compare the house price and median age data for Rother as both have seen some of the highest jumps in the South East.

New-build premiums

As we saw above, the house prices in the South East are consistently some of the highest in the country – but what’s the price difference between new and existing properties?

We took a look at the price-per-square-foot data and calculated how much more (or less) new houses were being sold for in areas across the country. New-build premium is the percentage difference between new and existing property prices.

For the South East, the new-build premium was minimal in 2021 at 0.08% – equating to just £0.29 per square foot. It has been steadily low for the last few years but was higher in 2019 at 4.78%.

This is a trend echoed on a local authority level too. In 2019, there were 13 local authorities in the South East that had a negative new-build premium. Compare this to 2021, where there were 29 local authorities with a negative new-build premium, and we get a clear picture of just how much the comparative value of new builds has been falling across the South East.

Typically, the local authorities with some of the highest house prices (as of November 2022) have consistently negative or the lowest new-build premiums in 2021, such as Elmbridge (-16.14%) and Guildford (-3.28%).

Oxford, however, had the lowest new-build premium in the South East at -22.83% (-£110.72 per square foot). This is a significant drop from 2019 when it was 42.19%. This may be linked to their significant delivery of new houses (they delivered 2,126% of their housing need in 2021) but there will be others that are better placed to unpack the root cause here.

The highest new-build premium in the South East was in Worthing at 78.21%. Again, when comparing this to past data, it shows a major shift. Only a year prior (in 2020), there was a negative new-build premium of -2.30%.

Some of the highest new-build premiums in the South East are in coastal towns and cities. This could be due to the lower percentage of constrained land (Green Belt, AONB, National Parks, and SSSI), meaning that there’s more un-constrained land available to build new developments.

Portsmouth and Southampton are other examples of coastal towns with high new-build premiums – 77.08% and 22.15% respectively. Not only do they have some of the lowest house prices in the region, but are also seeing significant population increases in the 20-24 age bracket who are typically seen as prime candidates for new builds. The high premiums for new properties and growth in the target market could make these lucrative markets for developers - however, the Solent region, in which these areas are located, has some of the most constrained areas for Nutrient Neutrality.

Finding opportunities in a challenging market

It may seem like England, and the South East specifically, is entering a ‘perfect storm’ of NIMBYism, national planning reform slowing down local plan making, Councillor resistance to development (often in the face of their Officers’ recommendation for approval), and natural constraints (i.e. water neutrality, nutrient neutrality, and a requirement for biodiversity net gain) – not to mention rising interest rates and continued supply-side constraints.

Despite this, there are still opportunities to be found and land values and population projections for the South East continue to look positive. For example, the changes proposed to the NPPF – while they are likely to hamstring development around the Green Belt and in areas that are currently at low density – building in areas where there is high demand and an existing high density (e.g. Portsmouth, Southampton, Slough, and Reading) may still be an opportunity.

Similarly, the NPPF changes will make it harder to find BNG or Nutrient Neutrality offsetting sites because it offers greater protections to BMV agricultural land. This creates an opportunity for land within the Green Belt that is not BMV agricultural land to act as offset sites for development sites that are outside the Green Belt. This kind of development is often allowed in the Green Belt, where residential development is not, as it doesn’t affect the ‘openness’ of the area. We looked at how much of the Green Belt within the South East would fall into this category (i.e. not BMV).

For the Metropolitan Green Belt (although not all of this is located within the South East) 25% of the Green Belt is rated below Grade 3b. A further 56% is categorised as ‘Grade 3’ or has yet to be surveyed. This means that it could fall within the classification of BMV if it is surveyed as being Grade 3a, but could also be classed as non-BMV if it is surveyed as 3b or below.

37.9% of Oxford’s Green Belt is non-BMV land, and a further 41.1% is classified as Class 3 or is yet to be surveyed. While in South and West Hampshire (the Green Belt surrounding Bournemouth, 51% is non-BMV and a further 34.5% is ‘Class 3’ or yet to be surveyed.

More data on detailed agricultural land classifications is due to be released later this year, we will keep this updated as soon as we can.

In the meantime, you can Download our eBook – Identifying Opportunities: Land Assemblies – to find out more.

Whichever area of the South East you want to concentrate your development efforts on, LandInsight can help you to source and assess off-market opportunities – giving you an edge over your competitors.

We’ll be updating this report whenever we have new data and we’ll let you know when new content is added.