RESIDENTIAL RESEARCH

AFFORDABILITY SUPPLY VS DEMAND COMMUTER LOCATION COMPARISON

FOCUS ON: PARSONS GREEN 2016

RESIDENTIAL RESEARCH

FOCUS ON: STAINES-UPON-THAMES 2018

2

Situated in the borough of Spelthorne in Surrey, in close proximity to Heathrow Airport, the M25 and the M4 Corridor, Staines-upon-Thames forms part of the Enterprise M3 Local Economic Partnership, the UK’s digital economy hub employing over 50,000 workers.

On top of a burgeoning local economy, Staines-upon-Thames is surrounded by some of the most expensive real estate in the UK outside of London (figure 2). Towns such as Virginia Water, Walton-on-Thames, Windsor and Weybridge form part of London’s prime

commuter belt. In comparison, it might

be argued that Staines-upon-Thames is

a relatively undervalued market given its

geographical location.

However, there are signs that this is

starting to change. During the twelve

months to September 2017, house prices

in Staines-upon-Thames increased

by 6.6%, outpacing growth of 3%

across Surrey. Despite this recent

outperformance, average house prices

in Staines-upon-Thames remain around

23% below the Surrey average.

ALL IN THE NAMEOver the last 10 years Staines has been rejuvenated, culminating in a name change to Staines-upon-Thames in 2012.

Please refer to the important notice at the end of this report

Contains OS data © Crown Copyright and database right 2017

Windsor

Weybridge

Walton-on-Thames

SheppertonChertsey

VirginiaWater

Staines-upon-Thames

HeathrowAirport

Woking

")

")

")

")

90

100

110

120

130

140

150

160

2016 2017201520142013

Surrey

Spelthorne South East

London

United Kingdom

Source: Land registry

FIGURE 2 Average sale price in the last 12 months

Source: Knight Frank Research, Land Registry, Macrobond

FIGURE 1

Price growth in Spelthorne, Surrey, South East, London and UK Prices indexed 100 = Jan 2013

Average Sale PriceYear to Oct 2017

Sub £250,000

£250,000 - £500,000

£500,000 - £1,000,000

£1,000,000 - £2,500,000

£2,500,000 - £5,000,000

£5,000,000+

3

Commuter belt affordabilitySpelthorne also has a lower house price to household income ratio – a common measure of affordability – than the wider Surrey, South East and England markets. The average home costs 7.6 times Spelthorne’s median annual income, according to analysis of Experian and Land Registry data, as shown in figure 3.

This may be one factor attracting greater numbers of Londoners to the town. Data from the Office for National Statistics (ONS) show 58% of residents moving to Spelthorne were from London in 2016, up from 51% in 2013.

The private rented sector is the fastest growing tenure type across the UK, and accounts for a fifth of the housing stock in Staines-upon-Thames (figure 6). Demand for rented accommodation comes mainly from young professionals and students at the Royal Holloway University in Egham, home to more than 9,000 students, Mosaic household analysis shows.

A lack of new homesAs a whole, the UK has an undersupply of new homes and Spelthorne is no exception.

There were 347 net additional dwellings delivered in the borough during 2016-17, falling well short of estimated demand. Spelthorne needs 590 additional homes a year if it is to satisfy the needs of the growing local population, according to

the Ministry for Housing, Communities and Local Government (figure 5). The number of households in Spelthorne is forecast to climb 24% to 52,000 by 2039 according to official projections.

Staines-upon-Thames has 756 private units in the development pipeline, according to Glenigan. Two schemes exceed 200 units, and are located on the High Street and Bridge Street.

Demand for new homes in Spelthorne has been boosted by the Help to Buy Equity Loan scheme, which has accounted for 144 sales since its inception in April 2013. We expect this trend to continue in the new homes sales market.

Connectivity Heathrow Airport and the air freight sector are two of the largest local employers in Staines-upon-Thames, with over 6,000 employees of Heathrow Airport living in the borough of Spelthorne. Other large employers include BP, Shepperton Studios, British Gas and Wood Group Kenny. As such, a considerable proportion of working residents in Staines commute to neighbouring boroughs as opposed to central London. This is evidenced by commuting data from the ONS which shows that, of the 18,001 residents commuting to London boroughs, 54% work in Hounslow and Hillingdon. Around 10% commute into Westminster, the City of London and Tower Hamlets.

EnglandLondonSouth EastSurreySpelthorne

8.0x 9.5x 7.7x8.3x7.6x

Source: Knight Frank Research

FIGURE 4

Housing stock by age Staines-upon-Thames

1973-Present1945-19721900-1939Pre 1900

10.4%

24.6%

30.8%34.2%

Source: Experian, Land Registry

FIGURE 3

House price to earnings ratio House price to household income ratio

0

100

200

300

400

500

600

2016-172015-162014-152013-142012-132011-12

Spelthorne net additional dwellings

Net

add

ition

al d

wel

lings

Spelthorne annual housing need, 2016-2026

Source: MHCLG

FIGURE 5

Housing supply vs housing need

FOCUS ON: STAINES-UPON-THAMES

4

However, the fundamentals are in place

for Staines-upon-Thames to establish

itself as a commuter location for the

capital. The fastest trains into London

Waterloo take 35 minutes, a commute

on a par with Weybridge and faster

than nearby Windsor, Chertsey, Virginia

Water and Egham, as shown in figure 7.

Annual rail season ticket prices are also

lower than prices for similar tickets from

stations in the surrounding area.

Meanwhile, from 2019, the Elizabeth Line (Crossrail) will run from Reading to Shenfield via central London, cutting journey times for millions of commuters. Those living in and around Staines-upon-Thames will be within a 15 to 20 minute drive of three Crossrail stations at Iver, West Drayton and Hayes and Harlington. Travel times to Bond Street will be reduced from 38 minutes to less than 26 minutes from the three stations, with Liverpool Street and Canary Wharf

less than 33 minutes and 40 minutes away respectively.

Further ahead, proposals for a second Crossrail line, running from South West London to North East London (Crossrail 2), include a regional branch from Raynes Park to Shepperton, which would provide Staines-upon-Thames with a fourth Crossrail station within a 20 minute drive of the town centre. However, it is worth noting that Crossrail

STAINES-UPON-THAMES

STAINES-UPON-THAMES FASTEST TRAIN TO LONDON37 MINS

DRIVE TIME TO CENTRAL LONDON1 HR 20 MINS

DRIVE TIME TO HEATHROW AIRPORT1 HR 20 MINS

WEYBRIDGE WINDSOR CHERTSEY VIRGINIA WATER EGHAM

DRIVE TIME TO HEATHROW AIRPORT

9 MINS

FASTEST TRAIN TO LONDON35 MINS

SEASON TICKET PRICE£3,356

DRIVE TIME TO CENTRAL LONDON

53 MINS

DRIVE TIME TO HEATHROW AIRPORT

16 MINS

FASTEST TRAIN TO LONDON32 MINS

SEASON TICKET PRICE£3,824

DRIVE TIME TO CENTRAL LONDON

60 MINS

DRIVE TIME TO HEATHROW AIRPORT

14 MINS

FASTEST TRAIN TO LONDON29 MINS

SEASON TICKET PRICE£3,712

DRIVE TIME TO CENTRAL LONDON

55 MINS

DRIVE TIME TO HEATHROW AIRPORT

14 MINS

FASTEST TRAIN TO LONDON53 MINS

SEASON TICKET PRICE£3,824

DRIVE TIME TO CENTRAL LONDON

58 MINS

DRIVE TIME TO HEATHROW AIRPORT

12 MINS

FASTEST TRAIN TO LONDON45 MINS

SEASON TICKET PRICE£3,792

DRIVE TIME TO CENTRAL LONDON

57 MINS

DRIVE TIME TO HEATHROW AIRPORT

10 MINS

FASTEST TRAIN TO LONDON41 MINS

SEASON TICKET PRICE£3,584

DRIVE TIME TO CENTRAL LONDON

55 MINS

FIGURE 7

Commute and travel time comparison

FOCUS ON: STAINES-UPON-THAMES RESIDENTIAL RESEARCH

20.3%

PRIVATELY RENTED

36.5%

OWNED WITHA MORTGAGE

26.9%

OWNED OUTRIGHT

16.3%

SOCIALRENTED

Source: ONS

FIGURE 6

Tenure in Staines-upon-Thames

5

2 is not expected to be operational until at least 2030.

The Elizabeth Line will help to attract more businesses into the area, as will plans for the Windsor Link Railway, a privately funded £200 million projected that would provide a direct rail link from Staines-upon-Thames to Heathrow Airport, as well as improving connectivity to Windsor, Slough and Reading. The line will potentially be in operation from 2022, subject to planning.

A local retail hubStaines-upon-Thames shares characteristics with surrounding towns that form London’s prime commuter belt. Lining both banks of the River Thames, the town has almost four miles of river frontage with homes, pubs and restaurants overlooking the river, interspersed by rowing clubs. The town is on the edge of the Colne

Valley Regional Park, a popular location

for walkers, runners and cyclists.

The local schools are also a draw. In the borough of Spelthorne there are 28 schools, of which 22 are rated ‘good’ or

‘outstanding’ by Ofsted. There are also a

number of independents schools within

a short drive of the town. Such a large

provision of quality schooling may appeal

to young families looking to move out of

London in the search for more space.

OutlookThe combination of affordability,

a direct train link into London which takes

less than 40 minutes, a bustling high

street, almost four miles of river frontage,

proximity to green spaces and Heathrow

Airport will all continue to contribute

towards Staines-upon-Thames becoming

an increasingly popular location for buyers

from London and further afield.

Source: Knight Frank Residential Research

South East house price forecast 2018-2022: 14.2%

Private Rented Sector Stock20.3%

Proposed £200m WindsorLink Railway, providing a direct rail link to

Heathrow Airport from 2022

Home-ownership: 63.4%, in line with UK average

Average monthly rent,two bedroom flat: £1,201

3.82 miles of river frontage in Staines-upon-Thames

2 Schools in Staines-upon-Thamesrated outstanding

144 homes have been purchasedin Spelthorne since April 2013,

via the Help to Buy Equity Loan scheme

20 minute drive to three Crossrail stations (from 2019)

347 net additional dwellingswere built in Spelthorne

during 2016-2017

Best location in UK to start a business in 2014

Fastest train to London Waterloo: 35 minutes

Staines-upon-Thamesdevelopment pipeline:

756 new homes

79% of schools in Spelthorne ratedgood, very good or outstanding

FOCUS ON: STAINES-UPON-THAMES RESIDENTIAL RESEARCH

14.2% forecast house price growth – South East England, 2018-2022

KEY FACTS

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Important Notice

© Knight Frank LLP 2018 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

For the latest news, views and analysison the world of prime property, visit

KnightFrank.com/blog

KNIGHT FRANKINTELLIGENCE

RESIDENTIAL RESEARCH

Gráinne Gilmore Head of UK Residential Research +44 20 7861 5102 grainne.gilmore@knightfrank.com

Patrick Gower Associate +44 20 3640 7015 patrick.gower@knightfrank.com

LONDON RESIDENTIAL

Seb Warner Partner +44 20 7861 5426 seb.warner@knightfrank.com

Matthew Goldsworthy Associate +44 20 7861 5440 matt.goldsworthy@knightfrank.com

RESIDENTIAL DEVELOPMENT

David Jones Partner +44 148 361 7937 david.djones@knightfrank.com

Charles Dugdale Partner +44 20 7861 5411 charles.dugdale@knightfrank.com

Neil Haynes Partner +44 1494 689 226 neil.haynes@knightfrank.com

Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.

Knight Frank Research Reports are available at KnightFrank.com/Research

Front cover image: Shutterstock

RESIDENTIAL RESEARCH

UK RESIDENTIAL MARKET FORECAST

“ The market is localised and we see slightly stronger growth in the Midlands, East of England and the North West, a continuation of the trend that has emerged this year.”

For the latest news, views and analysis on the world of prime property, visit our blog or @kfintelligence

UK HOUSE PRICE FORECASTUK house price growth has moderated from recent peaks, although markets remain highly localised.

Headlines Dec 2017UK house price growth has been slowing since the summer of 2014, although the annual change remains positive

Price growth across the UK is expected to be 1.0% in 2018, reaching 14.2% cumulatively between 2018 and 2022

In London, prices are forecast to fall by 0.5% in 2018, but cumulative price growth over the next five years is positive at 13.1%

2017-2022 Forecasts, December 2017

2017 2018 2019 2020 2021 2022 2018 - 2022Mainstream residential sales markets

UK 1.5% 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%

London -1.0% -0.5% 2.5% 3.0% 3.5% 4.0% 13.1%

North East 2.0% 2.0% 2.0% 4.0% 3.0% 3.0% 14.8%

North West 2.0% 1.0% 2.0% 4.0% 4.0% 4.5% 16.4%

Yorks & Humber 0.5% 1.0% 2.0% 3.0% 3.0% 3.0% 12.6%

East Midlands 4.5% 2.0% 2.5% 2.5% 3.0% 3.5% 14.2%

West Midlands 4.5% 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%

East 1.0% 2.0% 3.0% 3.0% 4.0% 3.0% 15.9%

South East 3.0% 0.0% 2.0% 3.0% 4.0% 4.5% 14.2%

South West 4.0% 1.0% 2.0% 2.5% 3.5% 4.5% 14.2%

Wales 1.5% 1.5% 1.5% 2.5% 3.0% 4.0% 13.1%

Scotland 1.5% 1.0% 1.0% 2.5% 3.5% 3.5% 12.0%

Prime residential sales markets

Prime central London east 0.0% 0.5% 1.5% 2.5% 3.0% 5.0% 13.1%

Prime central London west 0.0% 0.5% 1.5% 3.5% 3.0% 3.5% 12.6%

Prime outer London -1.0% 0.0% 1.0% 3.0% 3.5% 4.5% 12.5%

Prime England & Wales 0.7% 1.5% 2.0% 2.0% 2.0% 2.0% 9.9%

Residential rental markets

UK 1.2% 2.5% 2.5% 2.5% 3.0% 3.0% 14.0%

London 0.7% 3.0% 2.5% 3.0% 3.0% 3.0% 15.0%

Prime central London -1.5% 0.5% 1.5% 2.5% 3.0% 3.0% 11.0%

Prime outer London -3.5% -1.0% 1.0% 2.0% 2.5% 3.0% 8.0%

The momentum in house price growth is slowing in many parts of the country, and we expect price rises to remain muted overall next year amid increased economic and political uncertainty in the run-up to Brexit and amid more muted forecasts for wage growth. The market is localised and we see slightly stronger growth in the Midlands, East of England and the North West, a continuation of the trend that has emerged this year.

Once the Brexit deal is completed, we forecast rising momentum across the market, with price growth reflecting this in many locations. The variations currently

Source: Knight Frank Research NB. Price forecasts are for existing homes. Property values in the new-build market may perform differently.

observed in the prime housing markets in London and beyond are set to continue, and we explore this more fully in our blog.

The UK may now be entering a period of interest rate rises, but even so, we expect rates to be low compared to long-term norms by the end of the forecast period. While development levels are rising across the country, the shortage of new homes is unlikely to be fully reversed in the coming years, and that will underpin pricing.

On the other hand, factors such as deepening affordability pressures and property taxes, will continue to weigh on pricing.

Methodology Statement: House price forecasts are based upon time series regression analysis of relevant statistically significant macro-economic variables adjusted in-house to encompass externalities such as likely risk factors. The forecast uses the Nationwide House Price Index as a base. Our forecasts assume a Brexit deal, but with a two year transitional period.

LOOKING TO THE FUTURE: CROSSRAIL 2

DEVELOPMENT PIPELINE

HOW HAVE PRICES PERFORMED?

CROSSRAILANALYSING PROPERTY MARKET PERFORMANCE ALONG THE ELIZABETH LINE 2017

RESIDENTIAL RESEARCH

There was a record number of super-prime tenancies agreed in London in 2017 as price-sensitivity in the sales market continued to boost demand.

Some 137 properties were rented out at £5,000-plus per week last year, which represented a 34% increase on the figure of 102 in 2016. In the three-month period between July and September there were 49 transactions, which is a record for a single quarter in 12 years of LonRes data.

“The momentum of recent years is still gathering pace,” said Tom Smith, Knight Frank’s head of super-prime lettings. “Demand is resilient due to higher rates of stamp duty and the associated uncertainty over the short-term prospects for price growth in the sales market. A lack of clarity regarding Brexit has also been a factor.”

As well as more transactions, the deals agreed are now on a longer-term basis as renting becomes more accepted as a tenure model in the super-prime market, said Tom. The average length of a tenancy in 2017 was 589 days, which compared to 548 in 2016 and 528 in 2015, an analysis of Knight Frank data shows.

There was also a record number of £15,000-plus per week deals last year, with 20 recorded

compared to 11 in 2016. “There is increasingly the opportunity to rent the sort of high-quality stock that has come from the sales market that historically did not exist on the lettings market,” said Tom. “The clear message for landlords is that super-prime tenants will not compromise on quality in the same way as buyers will not.”

The prime central London sales market is now moving towards recovery mode as higher transaction costs are absorbed. Average prices above £10 million rose 0.2% in the year to January 2018, the first annual increase in almost two years.

In a sign that more tenants are anticipating this recovery, there has been an increase in the number who have requested a clause in the tenancy agreement giving them first refusal to buy at the end of the tenancy.

“This option was rarely mentioned a few years ago but is now a frequent topic of conversation on viewings. Many landlords have nothing to lose with this ‘try-before-you-buy’ route,” says Tom. “The worst case scenario is that you have an income stream that covers your costs and the best is that you also have a sale at the other end.”

Price sensitivity in the sales market meant there was a record number of super-prime tenancies in 2017. However, an anticipated recovery in sale prices means there are more ‘try-before-you-buy’ tenants, as Tom Smith tells Tom Bill

Super-Prime Lettings Team The Knight Frank Super-Prime Lettings team provides a bespoke service to clients with property interests of £5,000-plus per week in prime central London. Led by Tom Smith, the team consists of 12 local specialists with over 130 years of collective experience and has a dominant market share in London. It completed twice as many super-prime lettings deals in London as its nearest competitor in 2017, LonRes data shows. The team members are based in Belgravia, Belsize Park, Chelsea, Hampstead, Hyde Park, Kensington, Knightsbridge, Marylebone, Mayfair, Notting Hill, South Kensington and St John’s Wood. Knight Frank’s global real estate network gives the team access to London’s most exclusive properties on and off the market.

Tom Smith Head of Super-Prime Lettings tom.smith@knightfrank.com +44 20 7881 7730

Kensington Palace Gardens, let, guide price £15,950 p/w

Prince Albert Road, let, guide price £12,000 p/w

LONDON SUPER-PRIME LETTINGS INSIGHT SPRING 2018

FIGURE 1 London super-prime lettings volumes and rental values

0

10

20

30

40

50

Q1-

2015

Q2-

2015

Q3-

2015

Q4-

2015

Q1-

2016

Q2-

2016

Q3-

2016

Q4-

2016

Q1-

2017

Q2-

2017

Q3-

2017

Q4-

2017

£16,800 £15,000£18,500

£45,000

£30,000 £35,000£45,000

£13,500£20,000

£29,000 £25,000 £30,000

£6,000

£8,000

£10,000

Total Transactions Average weekly rent Maximum weekly rent

Source: Knight Frank Research / LonRes

LONDON DEVELOPMENT HOTSPOTSRESIDENTIAL DEVELOPMENT OPPORTUNITY AREAS 2018

RESIDENTIAL RESEARCH

AREAS TO WATCH PRICE FORECASTS MARKET UPDATE

London Development Hotspots 2018

UK Housing Market Forecast - Dec 2017

Crossrail 2017

London London Super Prime Lettings 2018

UK Retirement Housing Market Update Q1 2018

London Development Design Study 2017

SUPPLY AND DEMAND FUNDING MODELS POLICY FOCUS

RESIDENTIAL RESEARCH

RETIREMENT HOUSING MARKET UPDATE Q1 2018

DEVELOPMENT CONSULTANCY

LONDON DEVELOPMENT DESIGN STUDYSPRING 2017

The UK Tenant Survey 2017

The Wealth Report 2018

TENANT SURVEY 2017: RESULTS INVESTOR INTENTIONSSECTOR UPDATE

MULTIHOUSING 2017 PRS RESEARCH

201812th Edition

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The global perspective on prime property and investment