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Life’s a beach

by: By Ben Marquand
  • 20/10/2003
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High prices have not dampened demand for property in Brighton and the strong rental market is forcing buyers into the suburbs in this ever popular resort

Brighton has long held a special place in the psyche of the nation. Whether this began when it was made famous as one of Queen Victoria’s favourite retreats, or derives from the notoriety suggested by novelist Graham Greene, or from the equally notorious party conferences, or even because of the famous piers, is not clear.

Whatever the reason, Brighton is unique in the UK in terms of its mix of population and the impact this has had on the property market. Unlike many of the neighbouring areas on the South coast the city of Brighton & Hove has developed a reputation of being a bohemian and vibrant area despite being surrounded on both sides by areas dominated by an older generation. This has caused house prices in the area to rise significantly faster than in neighbouring areas such as Eastbourne and Worthing.

The last census, conducted in 2001, found that it is not densely populated and has a population of just 247,817, which was an increase of less than 2% on the previous 10 years. However, unlike many other areas in the UK this is not a static population and the census found that 18% of the population in Brighton are termed ‘migrants’, the highest in the South East. A migrant is defined as someone whose address one-year before the census was different from their address on census day. This suggests that people do not stay in Brighton for very long and it is unsurprising therefore that a fifth of households choose not to buy in the area but to rent from a private landlord. This is more than double the average for the South East and England and Wales.

Commenting, Roger Wilkey, managing director of chartered surveyors Wilkey & Co, says: “30% of the surveys that I have conducted over the last few years have been for buy-to-let mortgages.”

Local difficulty

The rental market in Brighton is boosted further by the fact that house prices have increased by 245% in the last eight years, pushing the price of the average house up to £183,308. This has meant that local people are finding it increasingly difficult to get onto the housing ladder, and perhaps is another indication why the population remains fluid. The amount of rented properties in Brighton is 18%, twice as high as the national average, with a very high number of houses in multiple occupation (HMO). And consequently the same census found that there were 114,476 households in 2001, and that the average household size was 2.09 – the smallest in the South East and the fifth smallest in England and Wales. Brighton has the lowest percentage of married couple households in the South East (23.9%) and the highest percentage of cohabiting households in England and Wales (11.55%). It also has the highest percentage of single person households in the South East and the eighth highest in England and Wales. While this can partially be explained by the high number of students living in the area, it is also worth noting that Brighton is firmly established as the gay capital of the UK.

Nevertheless, even renting in the city centre cannot be considered a cheap option as demand for quality property far outstrips supply, which is forcing rental prices ever higher. According to the local council, the average rent charged per week is £73.50 for a bedsit/room in a shared house, £140 per week for a one bed flat and up to £245 per week for a three-bed house.

Commenting, Les Newman, managing partner of Dean & Co. estate agents, says that the rental market has affected the market overall. He says: “While expensive, the city centre rental market is still doing fantastic business. The people looking to rent here are not all students, there are a lot of people on decent salaries, but the prices have risen so much that they cannot afford to buy. Some of them need to live in the centre and are finding that they can get more for their cash by renting a property than they could afford if they were to try and buy one.”

Tony Catt, managing director of local advisory firm Tony Catt Independent Financial Adviser, agrees but notes that the rental market will always feature strongly in the local housing market as the transient population is swelled by two universities and two hospitals – Brighton & Hove City Primary Care Trust, and Brighton & Sussex University Hospitals NHS Trust.

“In addition to the two hospitals and all the students and staff who work there but cannot afford to buy in the area, the city’s two universities, Sussex University, which is a campus based, and the University of Brighton are located just outside the city centre. However, I think that most of the students move into the city for part of their time here.

“And in the summer months the population is boosted by a huge number of foreign language students. Most of these are billeted on families but there is still an increased demand for rental property.”

However, unlike some areas of London there is still an opportunity for landlords, both existing and amateur. Marco Vallone, practice financial adviser at Alpha Financial Associates, says: “The market is quite saturated, but I think there will always be a demand for decent rental accommodation in the city centre because of the type of people who want to live there. The quality of properties on the market is quite low, but if landlords are prepared to invest in a property that costs just a little more, and it is in the right area then they should be able to see good returns.”

With such a strong rental market, estate agents are reporting that the number of owner-occupiers is falling. This is confirmed by the statistics from the 1991 census which show that 65% of households in Brighton & Hove were owner-occupiers, but by 2001this had fallen to 62%, which is much lower than the UK average of 68.9%. It is perhaps also unsurprising that figures from the local council indicate that one out of every 35 converted or shared dwellings in England and Wales is to be found in Brighton & Hove as properties in their original state are so expensive.

Commuter demand

Like other, larger, cities these high central prices have actually become a problem for the existing population. In recent years the growth in prices has been at least partly caused by the demand from borrowers moving to the area with the intention of commuting to London, or taking advantage of fast access it provides to Gatwick airport. Gatwick is less than half an hour away and London can be reached in under an hour by train. It is also close to Shoreham airport, which is the oldest airport in the UK and acts a link to businesses in the Channel Islands as well as the south of the country.

Wilkey says: “A lot of people are buying from out of town. When people from London see how cheap, relatively speaking, it is to buy here they are snapping up property which is forcing prices up. Not all of it is for commuters, a lot is for people who just want to come down at weekends.”

Catt agrees: “The housing boom in Brighton & Hove has meant that it has become very difficult for locals to buy in the city centre. The ripple effect on prices has meant that places like Peacehaven, which is about five miles east of the city, are now a major growth area.”

Newman also says that a lot of areas just outside the city centre are seeing substantial price increases, and these are the areas where estate agents are now seeing most of their enquiries per property. He says: “Generally speaking the areas just outside the city centre are seeing the most activity, where local people are looking to move just a little further out in search of a freehold property. One area which I can see really taking off is Hangleton, where the average house now costs around £200,000-£300,000. In my experience it tends to be the commuters who insist on living in the city centre, and will pay to be there.”

Catt says: “Shoreham Beach and Kemptown are two of the most popular areas and subsequently that is where prices are rising fastest. The area around the Prince Regent Swimming pool is also being developed as executive housing and a large new supermarket is thought to be under consideration.”

However, it is not all positive and just like any city there are areas which are in need of redevelopment. Catt notes that: “Moulsecoomb and Bevendean are areas that are considered to be socially deprived.” But he is unsure as to whether they are yet considered a good investment for the future.

On the whole the city is expected to defy some national predictions and prices should remain stable. Catt says: “While I can see the market stagnating for the next two to three years while salaries catch up with house prices, overall I think there will continue to be a healthy market at the smaller end because of the local demographics.”

Nevertheless, Brighton & Hove City Council has taken steps to reduce the affordability gap and has developed a number of affordable home ownership schemes. One such plan is Homebuy which allows the applicant to buy up to 75% of a home from the open market and receive a loan from the housing association for the remaining share. When sold the housing association receives 25% of the value.

Another, is the Starter Home Initiative which is aimed at key workers and is based on local needs and job role priorities. And in an innovative approach more likely to be found in mainland Europe, it has a unique free touch screen kiosk, Homewire, that provides people with information and advice on the council’s housing schemes, rental properties and where to get financial help if you want to relocate.

Empty promises

As a final area of support Brighton & Hove City Council has devised an Empty Property Strategy. It is backed by the Private Sector Housing Forum, and since its launch in 1993 has brought more than 2,000 properties back into use. This may prove crucial in fending off any over-inflation in prices as the council owns just over 13,000 properties, 11% of all housing in Brighton, some of which may be redeveloped to ease pressure at the lower end of the market.

It is perhaps surprising that the number of borrowers who have acquired poor credit problems is not substantially higher, but brokers in the local area believe that the situation has been helped by changes in the market generally.

Catt admits that around half of the clients that he deals with have some degree of credit-impairment. However, he says: “This is usually only light credit-impairment and a lot of the time it can be placed with a high street lender. We have seen them become a lot more flexible, and I have also seen an increase in self-certification mortgages because prices are so high and we have to be more creative with the figures. However, I am very careful about checking whether the client can afford the loan, and I think my colleagues in Brighton all do the same.”

As a final point, while it has been mentioned that Brighton is different in terms of demographics to much of the South coast, there is still a high proportion of elderly people. It has a below average number of people under 16 years old (16.65% as opposed to 20.16%), and an above percentage of the population who are aged over 85 (2.62% as opposed to 1.95%). As a result there are a lot of people sitting on a huge amount of equity, and it comes as no surprise to find that enquiries are increasing. Catt says: “In my experience I am finding more enquiries about equity release, but in a lot of cases a lot of people are going for it too young. I have had to turn a number of people away because it would not be worth there while going ahead at their age.”

Vallone agrees: “There is a lot of equity in properties in Brighton because prices have risen so much. I think it is starting to take off as I do not market equity release but I still get people coming through my door and asking about it.”

Brighton may now be more famous for the number of celebrities who choose to visit rather than the reigning monarch, but it is still entrenched in the national consciousness and its housing market is likely to stay buoyant as long as it remains so.

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