Brownfield costs are sending property developers sky-bound


Could rooftop development be the key to wider margins for developers?

The cost of brownfield land is rising strongly across the UK. This is adding to the cost of developing new build. However, the government has relaxed restrictions on building new homes on top of existing buildings. This could create opportunities for development in prime city locations. According to one source, there is potential for 180,000 new homes to be built on London’s rooftops alone.

In this article, we examine what this combination of higher land prices and relaxed rooftop regulations means for property developers.

Brownfield land prices soar in most of the UK

While the value of English greenfield land increased by 1.4% in the last quarter of 2017, brownfield land piled on 4.9% – and 9% over the whole of 2017. The increase was especially strong in Birmingham, where there is high demand from both residential and commercial property developers. As High-Speed rail services edge nearer to their start date, Birmingham is becoming an attractive destination for businesses relocating from London in particular.

Where is brownfield land in most demand?

Developers are competing aggressively for land near transport hubs, and in locations where transport links make travel to nearby city centres and centres of employment easier. With demand for new homes propped up by low interest rates and government moves to help first-time buyers, it’s likely that brownfield land values will continue to increase through 2018.

Is the government being realistic in targeting reduced development times?

Other moves by the government may cause developers to reconsider plans to buy brownfield land. Housing Secretary Sajid Javid has hinted that the government is preparing to take a tougher stance to ensure property developers speed up delivery of new homes. Measures may include compulsory purchase orders and planning permissions that last only two years.

Developers are suffering from a shortage of skilled labour. This could play a big part in the decision-making process when considering brownfield land packages. If the purchase is accompanied by restrictive building times, then developers could turn their backs on brownfield land. The result could be a reduction in the number of new homes built, with government policies working against its aim of building at least 200,000 new homes each year.

At present, the purchasing of brownfield land has not slowed, but the industry will be watching closely to see how this situation progresses in response to any new government measures.

If you can’t build sideways, build up

The government is to change planning policies to make it easier for homeowners to build upwards, providing such building does not destroy the surrounding skyline. The concept is to help relieve the pressure on open spaces. Under the new guidelines, two storeys could be added to existing residential, office, and retail buildings.

Sajid Javid said, “The answer to building new homes isn’t always an empty plot, or developing on a derelict site. We need to be more creative and make more effective use of the space we already have available. That’s why we are looking to strengthen planning rules to encourage developers to be more innovative and look at opportunities to build upwards where possible when delivering the homes that the country needs.”

Room at the top for hundreds of thousands of new homes

Apex Airspace, a specialist in building on top of existing buildings, has estimated that 180,000 new homes could be provided in London by building on top of existing properties. The most cost-effective way of developing such opportunities may be to build modular properties off-site and then hoist them into place. This will not only keep costs to a minimum but with many such new homes being able to be put in place within a day, disruption to daily life around these new build properties would also be minimised.

Property investors from around the world will be keen to see how these plans develop and to take advantage of investment opportunities as they come along. The demand for inner city living from renters in the UK is a major reason why property investors are keen to buy in these locations. Any policy and regulation change that makes it easier to buy such property will be welcomed.

Call the Castlereach team on 0207 923 5680 and let us help you connect with the investors that can make a real difference to your sales.

Live with passion

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Castlereach. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids. Brett holds both the Level 3 Property Mark Qualifications for Property Sales and Property Lettings and Management.