The Oxford/Cambridge Arc

Thoughts on the Government’s Oxford-Cambridge Arc plan and the next areas of growth from Cauvery Nanaiah, Senior Director at Strawberry Star Group.

Whilst the London newbuild market continues to gather apace, there is no doubt that the often-slow planning process coupled with the continuing squeeze on new site opportunities are prompting housebuilders to identify development opportunities outside the capital, both within the south east and further afield. Housebuilders and developers look to broaden their horizons identifying areas that deliver the same economic benefits and returns of building in the capital, whilst at the same time, offering a more accelerated housing delivery, readily available sites and a higher output of unit volumes.

With ambitious long-term housing targets and accelerated planning, many housebuilders are focusing their attention on opportunities within the Oxford-Cambridge Arc programme. Identified by the Ministry of Housing, Communities and Local Government as an “area of significant potential” this designated geographical “arc” area running between the two university towns covering Bedfordshire, Buckinghamshire, Northamptonshire and Cambridgeshire encompassing more than 25 local authorities, is rapidly gathering housebuilding momentum.

The “arc” boasts 10 universities, numerous technology hubs and a large young working population demanding decent, affordable, quality housing within commutable distances. The Government identified that doubling housebuilding rates in the Oxford-Cambridge arc coupled with delivering East West Rail and the Oxford Cambridge Express Way would increase the Gross Value Added of the “corridor” from £90.5 billion to £250 billion. And with one million homes predicted in the arc by 2050, there is plenty “up for grabs” for the housebuilder looking to spread its London wings.

It is widely known that house prices and rental prices in Oxford continue to grow at a phenomenal rate owing to rising demand. Consequently, many housebuilders are focusing on towns near Oxford for mixed-use developments and new residential schemes. For instance, Luton is considered as a good catchment area for the buy-to-let market in view of its proximity to Oxford. Apartments, houses and buy-to-let homes are in demand in the arc and housebuilders are positively responding to this trend.

The local authorities in the arc are also pushing housebuilders to come up with schemes to meet the growing local demand from house buyer and buy-to-let landlords. Many property investors are also seeing long-term value from investments in housing in the arc. The number of new schemes coming up in the arc towns is gradually on the rise. Besides, some of the towns, like Luton, which are closer to the arc fall under the London commuter belt, further helping housebuilders leverage the advantage of fast and quick connectivity to the UK capital.

At Strawberry Star we have identified Luton in particular, as a geographical hotspot for development within the Oxford-Cambridge arc. We believe it could become a hub for people working in science and media in Cambridge for example but who are priced out of the city due to overinflated house prices, which historically reflect those in the capital. We are already seeing the positive effects of the creation of the “arc” with house prices increasing 8 per cent between 2016 and 2017, registering attractive capital gains and rental growth year-on-year for buyers.

Luton has also recorded significantly more growth in the volume of all new build (786 per cent) and apartments (158 per cent) sold between 2013 and 2017 compared with other London commuter towns. By contrast similar commuter towns outside the Oxford-Cambridge arc including Watford, St Albans and Enfield have also experienced a decline in sales volume over the same timeframe.

Given that infrastructure development takes place in the Oxford-Cambridge arc along the expected lines, it could become another successful arc like the Cambridge-Milton Keynes arc. This can further be integrated into the greater Cambridge-Milton Keynes-Oxford arc, whose development is among the top priorities for the stakeholders concerned.

The National Infrastructure Commission in its report observed that that rates of house building will need to double if the arc is to achieve its economic potential. This requires a new deal between central and local government – one which aligns public and private interests behind the delivery of significant east-west infrastructure and major new settlements, and which seeks commitment to faster growth through a joined-up plan for jobs, homes and infrastructure. Any deal must give local areas the certainty, freedoms and resources they need to create well-designed, well-connected new communities. In this regard, local authorities can work with housebuilders to arrive at the projections.

The arc model could be the way forward for housebuilders and stakeholders of the infrastructure to usher in systematic and streamlined growth and to decongest the existing hotspots where price inflation has deterred first-time buyers from stepping on to the property ladder.

Cauvery Nanaiah is an established senior Marcom & Sales professional with two decades of strategic leadership experience across geographies in the property sector, technology, FMCG, BFSI, retail, and aviation sectors.

Cauvery Nanaiah, Senior Director, Strawberry Star Group