Who doesn’t want to live near the water? From Discovery Bay in Hong Kong to Chelsea Harbour, London. The V&A Waterfront in Cape Town, or Malibu, California. There is an almost innate attraction to undulating waves and open expanses of water. Notwithstanding concern as to climate change and rising sea levels in some developing countries, in mature economies, there remains a significant premium attached to living on the water’s edge. Knight Frank’s recent Global Waterfront Report, reached an unambiguous conclusion. Across twelve major cities globally, there was a 40% uplift for a waterfront property. In some regions this was particularly pronounced with Sydney commanding a 89% premium, and the Gold Coast, over 64%. Perhaps unsurprisingly, this was a less important factor in countries with inclement weather. This said, even London saw a 30% boost and intriguingly, Brits were the most likely nationality to look for waterside homes.
So if Brits are particularly keen on unleashing their inner mariner or tracking down a lakeside idyll, where do they go? Where offers connectivity to the major economic centres of the South East, but also offers up escapism and the promise of deck chairs and sand castles? One option, is Brighton and Hove. As you meander through the alleys of Central Brighton, past charcutiers and cheese mongers, you can scarcely believe you are only an hour from central London. With crisp sea air percolating the streets and hipsters juxtaposed with itinerant city workers, Brighton has an unreal quality. Even the pavilion, with its elaborate roofs and minaret-like towers, feels more Istanbul or Samarkand, than English Riviera. Unsurprisingly, savvy property investors have long realised this little town’s potential. Luxury apartment blocks have been constructed here and executive detached homes have proved highly sought after.
Brighton has seen an extraordinary increase in house prices in recent years. Between 2009 and 2019, the mean house price was up nearly 70%, second only to London and Slough, across the UK’s main metropolitan areas. This is partly a function of a modest 4% increase in housing stock in the decade to 2018, but also represents the attraction of the city and a nationwide reappraisal of work/life balance. With increased digitisation, manifest in the collective movement to homeworking and videoconferencing in the era of COVID, people are realising that living in a big city is not the only option available. It is striking that of all the demographic groups in Brighton, the one with the fastest rate of growth over the last decade, has been those aged between 18 and 29. This suggests that contrary to the trend in many parts of the UK, house prices are rising and the town is also becoming more youthful. Wealthy, or upwardly mobile young people, are making Brighton, home.
Brighton is one beneficiary of the movement of affluent young people to the coast, but it fits into a broader macro trend identified by Strutt and Parker’s Waterside Survey. Historically there has been an association between English seaside towns and the retired. Comfortably-off, septuagenarians, whiling away their twilight years with bowls and cream teas. But increasingly, it is the young who are valuing an outdoor lifestyle, and this often translates into considering living by the water. Strutt and Parker’s survey found over 25% of under 35s and over a third of 35-39 year olds were actively looking to live by the water by 2023. 40% of adults wanted to move to these areas by the age of 35, with a strong preference exhibited by those with young families. Crucially, this cannot be categorised as some form of pipe dream, as 75% of those under the age of 45 believed it to be an obtainable aim. And judging by the socio-economic profile of Brighton, this stands to reason.
The increase in property prices in Brighton has much to do with it being able to offer the enjoyable elements of waterside living, but also the amenity of a big city. According to surveys, individuals crave a more outdoors lifestyle and perceive of this movement as offering a more sociable and family orientated environment. What many of the young do not want, however, is seclusion and reduced access to restaurants, bars and places to recreate. Brighton, and neighbouring Hove, offer these attractive attributes and unsurprisingly property prices reflect this. Anecdotal discussions with investors active in the market confirm the current development pipeline is small relative to demand.
So what does this all mean for real estate investors? Is Brighton already overpriced and difficult to access? Possibly. As elsewhere in the UK, there is a growing constituency of people who reside in private rented sector accommodation due to the affordability gap in the city. This means there is robust market demand for rental properties, however, high prices mean rental yields are not as attractive as elsewhere. But going forward it is surely prudent to consider Brighton and Hove’s overriding fundamentals, and search hard for opportunities, rather than writing off wholesale.
Brighton still has a number of brown field sites earmarked for development, and there are strategic land transactions being discussed outside of the town and in its satellites. To benefit from these new developments requires a little imagination, and strategic counsel from advisors. But if you distil Brighton’s positive attributes you realise it still has the scope to appreciate further, both from the waterside premium, but from plenty more besides. As discussed, it is popular with the young and aspirational, particularly Londoners, who are migrating in record numbers. It benefits from high levels of weekly earnings and GDP per capita of the population, as well as significant rates of patent registration and new business start-ups. It is valued as a cultural centre, considered at the vanguard of green innovation and sustainability. And alongside its existing physical connectivity, a concerted ultrafast broadband strategy is making it even more suitable for flexible working. Taken as a collection, Brighton and Hove still have great potential, and many of its current and future successes derive from a simple reality which most of us can relate to: it’s a lovely location to live, work and relax.