Category Archives for "Developers"

What-homes-should-developers-sell-in-a-bouncing-property-market

What homes should developers sell in a bouncing property market?

Activity is up, but how could you grab a larger slice of sales?

Mortgage lending is rising. The number of residential properties purchased in February was the highest for the month since February 2007. The market is picking up. The question for property developers is how to grab a larger slice of this renewed activity.

Residential property purchases bounce back to life

The mortgage market is very much alive and kicking. The numbers and sizes of mortgages extended are up strongly compared to February 2017:

  • Remortgage transactions are up 11.3% to 35,400
  • Buy-to-let remortgage deals are up by 20.5% to 14,100

The number of house purchases has bounced, too. A total of 50,000 transactions were completed in February, with first-time buyers leading the way.

Although fewer buy-to-let purchases were made this February when compared to the same time last year, numbers have stabilised at around 5,200.

We believe that investor purchases may now begin to rise. We are seeing an increased appetite for residential investment property. This mirrors research by Aldermore, which found that 41% of landlords plan to expand their portfolio over the next 12 months, while only 8% plan to reduce.

This augurs well for the market going forward. Property developers that deliver what the market wants are likely to boost sales numbers.

What do buyers want from new build?

The property market in the UK is probably more diverse than it has ever been. Developers of new builds face challenges to create the homes that a changing demographic demand. It is no longer ‘one-size-fits-all’. Developers must meet demand by building the homes that people really want. This ranges from first-time buyer homes to upsizers and downsizers, relocators, and specialist accommodation.

Recent research conducted by the NHBC Foundation and Savills provides valuable insight into what buyers are looking for in new build properties.

·      First-time buyers

Their biggest concern is affordability. Schemes such as Help to Buy are important.

·      Urban dwellers

Those buying in urban areas desire proximity to transport hubs, particularly trains and buses.

·      Upsizers

Upsizers are generally expanding families and want homes in the catchment areas of good schools.

·      Downsizers

Downsizers are usually older. They want to live near transport hubs too but also desire to be close to local NHS services.

·      Suburban dwellers

Proximity to transport hubs is of lesser relevance, but they do want space to park their cars.

And property investors? What do they want?

The sector that the NHBC/Savills report doesn’t specifically cover is the property investor market. Perhaps it doesn’t need to. Our experience is that investors buy property to let to specific demographics. In other words, they desire all the above.

The single-style home approach may not be the best strategy for developers to follow in the constantly changing UK property market. But to sell across multiple buyer personas requires more effort, more marketing expense, and a greater emphasis on targeting a diverse range of buyers. Or you could let us take this strain, and sell to the increasing demand from our diverse property investors.

Benefit from the Castlereach advantage. Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

Social-housing-build-to-rent-but-to-let-3-lanes-for-property-developers

Social housing, build-to-rent, buy-to-Let – 3 lanes for property developers

Examining the latest news gives clues for property development sales potential

The government is seeking to boost the delivery of new homes to achieve its target of 300,000 completions each year by the mid-2020s. It has already put in place billions in funding towards this goal.

The question for property developers is, on what type of residential development should they concentrate? It’s not a clear-cut decision. There are many factors involved, including demand, competition, and government funding programmes.

In this article, we look at how three streams of demand for property stack up for the property development sales potential.

Social housing – the slow lane?

The government has ambitious plans to increase the availability of affordable homes in the UK. To this end, it wants to deliver tens of thousands more homes in the social housing sector. The government will be delivering the first part of this plan later this year when it publishes its green paper on social housing in England.

What is the problem?

Research by the Joseph Rowntree Foundation has concluded that the UK has underdelivered affordable homes by more than 180,000 since 2011. To make up the shortfall, it’s been estimated that the UK needs to deliver an extra 30,000 affordable homes each year.

What will the green paper tell us?

The green paper is likely to address several areas of concern, examining what has worked and what hasn’t, what and why things have gone wrong, and how to repair a broken sector of the market. In preparing the paper, the government has consulted with around 8,000 people either directly or online.

The government is now in the process of collating the results of its consultations, and these will direct the green paper.

Could the social housing green paper help to fix the housing crisis?

As we’ve seen, an average of 78,000 affordable homes (a mix of low-cost rent and shared ownership) are required in England every year between 2011 and 2031 to tackle the housing shortfall in the UK, according to the Joseph Rowntree Foundation.

The green paper may come up with some solutions to the affordable housing conundrum, but the real issue may prove to be the appetite to fund the expansion of delivery. The experience to date is that funding has hardly dented the shortfall. For example, the Chancellor of the Exchequer announced an additional £1.67 billion for London to deliver affordable homes – a huge amount of money that will deliver only 27,000 new affordable homes by 2022.

Could the green paper fuel social housing projects?

To deliver the real numbers of affordable homes needed in the UK, it is not green papers that will make the difference, but real funding of tens of billions of pounds – and that is something that any government is unlikely to sanction.

The green paper is a start towards the ambitions of delivering more affordable homes in the UK, but it is no more than turning the key in the ignition.

Build-to-rent – the middle lane?

In a recent article, we asked if property developers should focus on the build-to-rent sector. The first annual data on the sector has now been published and shows that the number of build-to-rent homes either under construction or in planning has increased by 30%. There are now 117,893 at all stages of development in the UK. Completions are rising, too, with more than 20,000 delivered in the year.

Finally, a blueprint for build-to-rent

The build-to-rent sector is accelerating in the regions outside London, and the government is backing it. But the planning to date has been somewhat haphazard, without a central government blueprint. However, with the National Planning Policy Framework now in place, this could change. Local authorities will now be obligated to identify how many new rental homes are needed in their locations.

Momentum building

According to the conclusions of the build-to-rent research conducted by Savills when compiling the buy-to-rent data, the build-to-rent sector is building up ahead of steam. Its director of residential investment research and strategy, Jacqui Daly, said: “At this rate of growth, we expect that the build-to-rent pipeline could double to around 200,000 within the next two years.”

Well, perhaps not quite double – but an increase from 117,893 to 200,000 is certainly not to be sniffed at.

Government backing for this sector includes £4.1 billion to fund roads, schools, and medical centres – the infrastructure that huge development will rely on.

Does build-to-rent need to evolve further?

Much build-to-rent development has concentrated on serviced apartments, but there is a growing concern that this will fail to cater for the needs of a diversified population. The need for low-rise, quality family homes are being overlooked.

The momentum building in the sector is good news for property developers but does not come without challenges. The higher average rental prices do not meet the needs of affordable housing, and the overreliance of serviced apartments, if continued, could fail to deliver housing needs in years to come.

It may be that some readjustment is needed before build-to-rent can move across to the fast lane.

Buy-to-let – returning to the fast lane?

Despite the government’s attempts to put the brakes on the buy-to-let sector, it is once more accelerating in the fast lane. The tax changes (including a reduction in mortgage interest tax relief), changes to how wear and tear costs are treated, and an increase in stamp duty liability on investment properties, have now filtered through. Investors appear to have learned to live with them.

Buy-to-let landlords are buyers, not sellers

Contrary to the doomsday forecasts of buy-to-let investors fleeing the market, recent research shows that the appetite for buy-to-let investment property has strengthened. Surveys by Aldermore and OneSavings Bank indicate that:

  • 41% of buy-to-let landlords expect to expand their portfolios over the next 12 months
  • Only 8% of buy-to-let landlords expect to reduce their portfolios
  • Buy-to-let landlords are diversifying their property portfolios

Tackling the effect of tax changes

Investors have very quickly become adept at tackling the tax changes. They have learned to restructure their portfolios to mitigate higher tax liabilities. Developers have played their part, too, by showing greater flexibility when it comes to negotiating – often reducing (or negating) the effect of the 3% stamp duty surcharge on investment properties.

Mostly, though, investors are taking a long-term view. They understand that costs become less of a factor when considered over 5, 10, or 20 years.

Why the renewed enthusiasm for buy-to-let investment?

Despite the tax changes, property investors have realised that the positive dynamics in the UK property market remain intact. These include:

  • Undersupply and increasing demand
  • Rising rental prices
  • Rising house prices
  • An ageing population in city centres

There are somewhere between 1.75 million and 2 million buy-to-let landlords in the UK (HMRC and Paragon, 2016). If the Aldermore research is correct and was it extrapolated across the entire buy-to-let community, this means there could be as many as 880,000 buy-to-let landlords considering adding to their property portfolios in the next 12 months. That puts buy-to-let firmly in the fast lane for UK property developers.

To take advantage of the demand from buy-to-let investors, call Castlereach on 0207 923 5680.

Live with passion

Brett Alegre-Wood

Should-property-developers-focus-on-the-build-to-rent-sector

Should property developers focus on the build-to-rent sector?

Why property developers and tenants could be the poor relations in build-to-rent

The UK’s private rented sector (PRS) is growing at a rapid pace. Today, around one in five households are in private rented accommodation, and this proportion is expected to grow to one in four by 2025. Within this sector, investment in build-to-rent is expected to almost treble in the next five years. But what are the advantages and disadvantages of focusing on build-to-rent development?

For government

Build-to-rent has the potential to step in where government and local authorities cannot. Money from large investment firms provides the financial impetus to increase the supply of homes and tackle the UK’s housing crisis. The government has recognised this potential and has started to invest heavily. Already it has created a £1 billion Build-to-Rent Fund (B2R) and hopes to unlock billions more in investment to create a better private rented sector.

For institutional investors

For large investment funds, the private rented sector is attractive. They are awash with cash and investing in a sector that is growing and provides good, steady yields are, perhaps, a no-brainer. PRS funds could offer their investors a steady stream of income without the need to become landlords in their own right.

For tenants

Tenants should benefit from renting from a single professional property manager, rather than an individual landlord. Further, purpose-built rental blocks often offer residents extra amenities, such as gyms, study areas, and communal lounges and gardens. Perfect for the lifestyle needs of young professionals.

For developers

For developers, the potential to sell a whole development to a single institutional investor removes much risk. This should enable the building of new homes to be ramped up. However, there is a price to pay for this perceived reduction in risk. Lower risk walks hand in hand with lower rewards. Institutions drive hard bargains to take up whole developments for build-to-rent. Property developers’ margins are reduced, and that leaves less to invest in the next development.

Is build-to-rent the solution to the UK’s housing crisis?

There are also questions being asked about build-to-rent’s ability to be the solution to the UK’s housing crisis. The crux of the issue facing the UK is both numbers of homes available and their affordability.

A study by JLL found that there is an average 11% premium on rental prices in properties in build-to-rent developments in London. To fix security of rental income, many of the property management companies running build-to-rent blocks require their tenants to have a high rent to income ratio.

In summary, the build-to-rent sector may not be the solution to the UK’s housing crisis that many expect it to be. Tenants must be high-income earners and pay a premium to other rental properties – working against the government’s policy of creating affordable housing. While institutional investors drive hard bargains and create strong income streams, build-to-rent could also reduce the margins of property developers, hampering their ability to build more in the future.

To maximise your margins and profits, call Castlereach on 0207 923 5680. Discover how new build developers benefit from the Castlereach advantage, including:

  • The staff that are fully trained and continuously trained
  • Market knowledge
  • Building effective and lasting partnerships
  • Up-to-date and innovative solutions and sales practices
  • An international reach to thousands of investors

Live with passion

Brett Alegre-Wood

Developers-take-note-you-are-not-the-agent-of-change

Developers take note: you’re now the agent of change

Soundproof your development and sales-proof your marketing

It was read without fanfare. There were no bands playing, and no drumroll. But it is likely to have an impact on property developers, especially those creating new homes by converting historic buildings in town and city centres. In case you missed it, the Agent of Change Bill is passing through Parliament, with government backing.

In this article, we’ll summarise what this new law could mean for property developers.

What is the Agent of Change Bill?

The proposed Agent of Change law moves the onus for noise impact management of existing venues from the venue to the developer. It’s designed to stop night venues closing because of noise issues caused to residents of buildings that have changed use.

In London, for example, it is estimated that as many as a third of music venues and pubs have closed over the last few years, and many of these closures have been caused because of noise issues (as well as increased rents and property development). Famous venues that have closed include the Marquee Club, The London Astoria, the 12 Bar Club, and Madame Jojo’s.

The problem for music venues is that, well, they are noisy. This is OK while they are set in the middle of industrial areas of warehouses. But as planning rules have been relaxed, many of these buildings have been repurposed. Instead of being situated in the middle of empty spaces at night, existing night venues have found themselves surrounded by residential buildings – and a raft of complaints.

What does the new law mean?

In a nutshell, the Agent of Change Law will protect existing venues from complaints against them made by new residents.

Venues have always been held responsible for controlling the noise they emit. Should the new Agent of Change Law come into force, the responsibility for noise control will pass to the developer. New residents will have no recourse to complain about the noise coming from the existing venue, and property developers will have to let prospective buyers know about noise levels in advance.

What might developers need to do?

Apart from making prospective buyers aware of the decibel levels they may be subjected to at night, it may be that developers will now be held responsible for noise control. That could increase costs of development, though, even then, soundproofing measures may not be sufficient. Vibrations from heavy bass music are difficult to negate.

As a developer, you’ll need to identify the noise issues that may exist and act to soundproof buildings that you are converting to residential. You’ll be expected to tackle the issue of noise before it becomes an issue. This should help to maintain a selling point of your development while ensuring residents are happy in their new homes. Knowing who to sell them to, and how, is where Castlereach comes in.

Call the Castlereach team on 0207 923 5680, and discover how we reach the property investors that invest in London and the UK’s major towns and cities.

Live with passion

Brett Alegre-Wood

New-build-completions-soar-as-UK-is-on-target-to-reach-a-million-by-2020

New build completions soar as UK is on target to reach a million by 2020

The construction industry defies Brexit bashers on all levels

In 2015, the government set a target of building one million new homes by 2020. For three years, it looked like this target would be missed by a mile. Adding to the pessimism, the June 2016 vote to leave the EU was forecast to squeeze the life out of the construction industry by sucking out EU-born workers. Just two years after the EU referendum and two years before the target deadline, the industry is reporting a complete turnaround.

This article highlights the good news recently delivered by the Ministry of Housing, Communities and Local Government, and the Home Builders Federation (HBF).

New home completions soar in the UK

Reporting on the numbers of new home completions are soaring. In the fourth quarter of 2017, they hit 42,860. That’s:

  • 7% higher than the third quarter figure
  • A whopping 17% higher than the same quarter of 2016

Over the year, new build completions were 163,250. That’s 16% more than were completed in 2016.

New build starts are rising, too

The Ministry of Housing, Communities and Local Government figures also give an insight into the future:

  • New builds start in 2017 were 162,180
  • New build starts in 2017 were 5% higher than in 2016
  • Crucially, new build starts increased by 5% in the fourth quarter compared to the third quarter

Though still below the peak of new starts (in the March quarter of 2007), new build starts are now 141% above the trough in the first quarter of 2009. And all sectors improved their performance in the final quarter of 2017 compared to the previous quarter:

 

  • Private enterprise new build starts increased by 8%
  • Private enterprise new build completions increased by 7%
  • Housing association new build starts were 2% higher
  • Housing association new build completions were 2% higher

The UK is now on target to build a million new homes by 2020

In its most recent industry report, the HBF says that the industry it represents is now on target to build one million homes by 2020. This should help ease the housing crisis in the UK, especially as the report also highlights that:

  • Supply is now up 74% in four years
  • Quality of build continues to improve
  • Private sector builders are providing 50% of all affordable housing delivered

The construction industry is employing tens of thousands of new recruits

Contrary to the views of many experts prior to and immediately post the EU Referendum, the construction industry does not appear to be suffering from a shortage of workers, a fall in demand, or a collapse in values. Indeed, the HBF report also details how the industry is recruiting tens of thousands of new employees, as it gears up to deliver 300,000 new build completions each year by the mid-2020s. Discussing the report, HBF Executive Chairman Stewart Baseley said:

The Government has quite rightly recognised the social and political need for them to address the chronic housing shortage we face. Housebuilders have risen to the challenge and delivered huge increases in supply, whilst providing increasing contributions to local infrastructure, amenities and affordable housing.

At the same time, the industry has invested hugely in training, recruitment, and land to ensure it is geared up to deliver Government promises. The industry has also reacted decisively to reverse the slight, but unacceptable falls in customer service and quality, something that takes a commitment from board level down.

Wages are rising in construction

As more people are recruited into the construction industry, and property developers begin to work more closely with local authorities (who now have a remit to release land and speed up the planning process), the Office of National Statistics has reported that wages in the industry are rising faster than in any other sector of the UK economy.

Average weekly wages are now £606, up by 5.2% since the EU Referendum. Bricklayers at small developers now earn an average of £42,034 per year, and in London, this can rise to around £90,000 per year.

The challenge for property developers over the next few years could be the shifting from building new homes in high volumes to selling them. Castlereach is here to help you overcome the sales challenge. Call the Castlereach team on 0207 923 5680, and discover how we reach the property investors that will help your property sales numbers keep pace with your new build start and completion targets.

Live with passion

Brett Alegre-Wood

Why-all-UK-property-developers-must-watch-Manchester

Why all UK property developers must watch Manchester

A council vs developer legal battle could challenge developers across the country

Property developers across the length and breadth of the country should be monitoring the developing affordable housing row in Manchester. It’s turning into a real fight between heavyweights.

In one corner are the property developers. In the other is the city’s Labour council. They’re squaring up for a fight, and the politicians have recently thrown a huge right hook. If it lands and turns out to be a knockout blow, the tactic could have ramifications for property development across the UK.

What is the argument?

There’s a housing crisis in the UK. Property prices and rents are rising, and for many, they are not affordable. The government is pushing property developers to build more new homes, with a target of 300,000 every year by the mid-2020s. The demand for housing has helped to push prices up (despite Brexit, which ‘experts’ said would crash prices by as much as 30%).

The government’s solution to the issue of affordability is to request that developers build a portion of every development as affordable housing, for both renters and homeowners.

In Manchester, developers say that the cost of development doesn’t allow them to build affordable housing. According to a report in The Guardian, “none of the 14,667 homes in big developments that have been granted planning permission in the last two years are set to be affordable”.

What is Manchester Council’s right hook aimed at property developers?

Manchester Council is trying to force property developers in the city to build affordable homes on their developments. The latest tactic, if successful, could be a hammer blow to the industry. The council (consisting of 95 Labour councillors and one Lib Dem) recently voted unanimously to demand more transparency from property developers. It wants developers to “make a fair contribution to affordable housing”.

What might transparency mean?

The council wants all property developers in the city to make their finances public. Crucially, this includes viability assessments. Can you imagine being forced to make such documentation public? It’s commercially sensitive. Publishing such information is tantamount to telling the world your business strategy and costing structure. I don’t know many businesses in any sector that would be prepared to make public this type of information ahead of execution.

Why are no affordable homes being built in Manchester?

Cost. It’s not viable to build affordable homes. Until now, Manchester’s council leadership has argued that it carries out a comprehensive examination of the viability assessments before giving the final rubber stamp to every development. With this vote, the backbenchers have now got their wish.

What are the next steps?

Here’s where it is going to get interesting. Manchester’s council leaders have already conceded that it may not be possible to force developers to publish such commercially sensitive documents. They have warned that it could result in a legal battle. If this is the case, development could slow while the two corners slug it out in the courts.

Unless a practical solution is found, and if Manchester’s council continues on the path towards full disclosure of all a property developer’s confidential strategic documents, it’s possible that Manchester’s affordability situation will worsen, not improve, as development is put on hold while legal battles are fought. This could harm property developers, the council, homebuyers, and renters in Manchester.

If this fight does go the whole 12 rounds, the outcome could have a big impact on property development in all of the UK’s towns and cities.

We’d love to hear how property developers think this could affect their business and development plans. If you are forced to make public your viability assessments, would you rethink your development strategy? Call the Castlereach team on 0207 923 5680, and together let’s give momentum to the views of the property development community.

Live with passion

Brett Alegre-Wood

The-Spring-Statement-little-sparkle-but-no-cyanide-for-property-developers

The Spring Statement: little sparkle, but no cyanide for property developers

A little more meat on the bones of housebuilding in the UK

Philip Hammond’s Spring Statement held few surprises for property developers in the UK, but it did provide some points of interest nonetheless. Chief among these was the announcement of more money for affordable homes in London, and the release of the initial findings of the land banking review, led by Sir Oliver Letwin.

Hammond confirms 300,000 homes-per-year target

In last year’s Autumn Budget, Hammond announced a programme of investment totalling at least £44 billion over the next five years. The government’s announced goal was to increase the supply of new homes to 300,000 per year by the mid-2020s. In the Spring Statement, Hammond put a little more flesh on the bones and told us how the government are progressing towards this target. He confirmed that:

  • 44 areas are bidding for a slice of the £4.1 billion Housing Infrastructure Fund
  • The government is to double the size of the Housing Growth Partnership, to £220 million

More money for housing in London

Hammond also announced an extra £1.67 billion for London, targeting the building of 27,000 more affordable homes by 2022. That appears to be a fairly sizeable injection of money, and one that means the building of almost 100,000 new affordable homes will be underway in the capital by 2021.

In response, London’s mayor, Sadiq Khan, said, “The housing crisis is the capital’s biggest challenge and we are still not seeing the level of investment that we need if we want to tackle it head-on. We still need more and devolved investment, we need an overhaul of powers to assemble unused land for homes, and we need councils and City Hall to be freed to build many more affordable homes ourselves.”

Abolishing stamp duty for first-time buyers – creating a lopsided market?

The chancellor said that 60,000 first-time buyers had been helped by the abolition of stamp duty for first-time buyers announced in the Autumn Budget. That’s good news.

However, in response, some have argued that the middle classes and those further up the property ladder are now at a distinct disadvantage. As reported in PropertyWire, Shaun Church, director at mortgage broker Private Finance, noted:

“With no sign of stamp duty reform for those further up the ladder, the prohibitively high cost of moving is continuing to dampen activity at the upper end of the property market. While this might not seem like a problem for ordinary buyers, a healthy market requires plenty of movement at all rungs of the ladder. A blockage at the top will have a trickle-down effect, as those who want to upsize may struggle to find any properties available, which will, in turn, impact those further down the chain.”

Rory O’Neill, of Carter Jonas, echoed this sentiment:

“We continue to question where the support lies for second-steppers, many of whom are desperate to graduate out of their starter home and into a grown-up property. They constitute the increasingly squeezed middle class, and we hope that a proportion of the much-needed new homes that Hammond continues to pledge will be adequately sized and ring-fenced for these forgotten homeowners looking to secure enough space in which to bring up a family.”

The land banking review – initial findings

In the autumn, Sir Oliver Letwin was appointed to conduct an independent review of the issues surrounding housebuilding in the UK. His remit was to explore and explain “the significant gap between housing completions and the amount of land allocated or permission in areas of high housing demand, and make recommendations for closing it”.

Sir Letwin has sent a letter to the Chancellor and Secretary of State for Housing, Sajid Javid, detailing his initial findings concerning land banking. In the letter, Sir Letwin describes the reasons why the gap between housing completions and planning permissions exists. He notes these as “a web of commercial and industrial constraints” and highlights:

  • limited availability of skilled labour;
  • limited supplies of building materials;
  • limited availability of capital;
  • constrained logistics on the site;
  • the slow speed of installations by utility companies;
  • difficulties of land remediation; and
  • provision of local transport infrastructure.

However, Letwin doesn’t think these are the primary constraints of building more new homes. He concedes that they all play a part in “the velocity of build-out” (how fast new homes can be built), but says that it is his belief that “The fundamental driver of build-out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into the local market without materially disturbing the market price.”

Initial responses to Letwin’s letter have been mixed.

It has been called both a “fumbling in the dark”, with Letwin ignoring (for the moment) “the contribution made to housing delivery by small and medium-sized housebuilders and the absorption rates of smaller sites” (Sarah Fitzpatrick, Berwin Leighton Paisner), and an approach that is “very well-reasoned” (Melanie Leech, BPF).

In conclusion, the Spring Statement delivered what we may have expected to deliver: little sparkle, but, thankfully, no cyanide for property developers.

We’d love to know what you think, too. Call the Castlereach team on 0207 923 5680, and together let’s give momentum to the views of the property development community.

Live with passion

Brett Alegre-Wood

Will-the-NPPF-achieve-its-aims-Property-developers-now-have-their-say

Will the NPPF achieve its aims? Property developers now have their say

It’s time to respond to the government’s aims for planning in the UK

The government has released more details of its plans to revamp planning in England. It wants to speed up the process as it attempts to drive housebuilding to 300,000 new homes each year by the mid-2020s. All market participants can have their say through the consultation process, which closes on 10th May 2018.

In this article, we outline the main points of the announcement made by Housing Secretary Sajid Javid.

Planning permissions to be fast-tracked

The government wants planning permissions to be fast-tracked. It believes that this is the major bottleneck that is holding back building new homes. To accomplish this, the government is planning a major overhaul of the National Planning Policy Framework. This aims to:

  • Get local authorities and property developers working together
  • Include community groups to ensure that people and businesses affected by new developments have their say

Local authorities to be targeted on the delivery of new homes and not numbers planned

There will be a new housing test. This will focus on local authorities delivering new homes instead of the numbers of new homes planned.

Developers will also be targeted for the delivery of new home numbers

It is not only local authorities that will be targeted on new home deliveries – so too will property developers. The targets here will include delivery of commitments, including infrastructure and affordable housing.

Making brownfield land easier to access

Local authorities will be encouraged to release brownfield land for redevelopment, especially to build high-density housing.

Councils will be expected to free up underutilised commercial, retail, and industrial space to provide housing.

Protecting the green belt – building up, not out

Another aim of freeing up more brownfield land is to help preserve the green belt. Councils will be given greater freedom to allow developers to build up rather than out – like the ‘two extra storeys’ regulations being introduced in London.

Developers will have to prove their case

Developers will need to show that there is a positive environmental impact on its developments (especially where building up) and that developments protect ancient woodlands for future generations.

Building for the first-time buyer

Local authorities and developers will be expected to provide more developments for first-time buyers. There will also be a provision for an increase in the build-to-rent sector offering family-friendly tenancies, and affordable homes for key workers.

The gap between homes planned and homes delivered will be cut

The government wants to close the gap between homes planned and homes built. To aid this, a new approach to assessing the number of homes needed will be introduced. This should make it clearer for property developers to understand needs and what is expected of them. Councils will have greater authority to hold property developers to their commitments.

Can the NPPF deliver on its goals?

In delivering the announcement, Sajid Navid said, “An entire generation is being locked out of a broken housing market as prices and rents race ahead of supply. Reforming the planning system is the crucial next step to building the homes the country needs.

“This government is determined to fix the broken housing market and restore the dream of homeownership for a new generation. There is no silver bullet to this problem, but we’re re-writing the rules on planning so we can take action on all fronts. In moving to a more integrated society, the focus for everyone, whether a developer or a neighbourhood group, must be to come together to build the homes our communities deserve.”

It’s a noble mission, but several questions immediately spring to mind:

  • Is the UK in a position to deliver?
  • What sites are best for local authorities to release to provide a boost to the delivery of homes?
  • How will small and medium-sized developers be supported to deliver?
  • Will red tape reduce enough to enable more rapid development of homes?
  • Shouldn’t public sector land be more readily freed for development?

We suspect that developers will want to take part in the consultation process. To read the consultation documents and respond, click the link below:

Open consultation: Draft revised National Planning Policy Framework

We’d love to know what you think, too. Call the Castlereach team on 0207 923 5680, and together let’s give momentum to the views of the property development community.

Live with passion

Brett Alegre-Wood

Medium-term-outlook-for-property-developers-improve

Medium-term outlook for property developers improves

Short-term struggles could evolve into medium-term demand

The RICS UK Residential Market Survey is one of the most important in the UK. It’s a great indicator of short-term market perceptions and one that helps to predict future trends. In this article, we look at the findings of the January survey, which was published recently.

New buyers and sales drift lower… again

For 10 straight months, the number of new enquiries from buyers has fallen. The number of new sales has now fallen for 11 consecutive months.

New instructions are holding back the market

The balance of respondents reporting an increase in new instructions eased back to its lowest level since May last year. At -17%, this was the fifth consecutive decline in new listings. The average number of properties that agents have for sale fell again and is now hovering only a little above the lows seen in June/July l2017.

The pipeline of new instructions is also weak

New valuations undertaken in January fell, too, by 10% from January 2017. Given this reading, it appears that the near-term pipeline is weak.

But there is more optimism for the future

Before getting carried away in the doom and gloom of it all, survey respondents have reported that they are more optimistic for the remainder of 2018. A more stable trend is expected to emerge as we move through the year, and the outlook is now ‘modestly positive’. A balance of +33% now expects sales to pick up over the next 12 months, with improvement expected in most parts of the country.

And pricing appears to be rising

It looks like house prices have started to grow more strongly, with the positive balance of those reporting price rises at +8%: unchanged from December 2017.

There are significant regional differences

Even though prices are again rising modestly strongly nationally, when examining the survey at a regional level there are some marked differences:

  • Prices are fading in the South East, East Anglia, and the North East
  • London prices are falling more steeply than in other regions
  • The Northern West, Northern Ireland, and Wales saw the highest price rises

The high end of the market is still pressured

The high end of the property market continues to be challenged, with a fraction more than two-thirds of survey respondents saying that sale prices were below asking prices for properties priced above £1 million. However, once more an improvement has been reported, with the number of respondents reporting lower sales prices than asking prices falling by 4%.

Moving down through the price ranges:

  • 56% of respondents reported sales prices lower than asking prices in the £500,000 to £1 million price bracket
  • 58% of respondents noted that sales prices were the same as or higher than asking prices where the asking price was below £500,000

The 12-month outlook is more positive

Looking at a longer time horizon, the outlook is more positive. Excluding London, where respondents are still negative about the medium-term future, all regions expect the market to turn more positive as we head towards the second half of the year.

Even in London, the balance of those forecasting more price declines fell from -41% to -21% – this is the most positive survey result for six months.

Lettings are edging higher

Demand for rental properties has increased, while listings by landlords have eased back again. Thus, expectations for higher rental prices have firmed.

What might all this mean for property developers?

Undoubtedly, it appears that certainly, the first quarter of this year may remain tough for property developers. As we progress through to summer and autumn, things should get a little easier. However, with the balance of demand for lettings indicating a continued tightening of the rental market, it could be that investors begin to flex their muscles again sooner rather than later.

Higher demand for rental properties should translate into higher rental prices and better yields. This could reignite the fire in investors’ bellies, and prompt better sales of off-plan and new build properties to private rental sector investors.

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 – investors who are investing today for long-term returns.

Live with passion

Brett Alegre-Wood

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Could modular housing be the future of property development in the UK?

Benefits for all, now prefab building technology has advanced

With the UK experiencing a worsening housing crisis, modular homes are seen by many as the future. With faster delivery times than traditional bricks and mortar properties, these factory-built homes that are erected on-site could help the government deliver on its promise to build 200,000 new homes every year, rising to around 300,000 within a decade.

A new generation, a new style of prefab?

The idea of factory-built homes is not new, of course. They were first used to solve the housing crisis after the end of World War II. In around 10 years, 600,000 prefabricated homes were built to cope with the return of troops from abroad.

In the 1960s, as society changed, and people left their family homes at a younger age, demand for homes again exploded. In one year alone, 1968, the UK delivered 525,000 new homes. Many of these were prefabricated.

Today’s modern prefabs offer a range of benefits above their predecessors. These modular homes:

  • Are constructed using longer-lasting galvanised steel frames
  • Benefit from better insulation, giving greater energy efficiency and better soundproofing
  • Include services and kitchens – almost ‘plug and play’

Modular affordable options

One of the arguments against modular homes is that they are as expensive as traditionally built properties. However, some developers are building modular homes that allow the buyer to decide the level of fixtures and fittings. This allows the buyer to buy a ‘shell’, and finish the internal to their own likes and dislikes. This reduces the cost of their initial purchase and is an idea applauded by London Mayor Sadiq Khan, who has promised to build 90,000 affordable homes in double-quick time.

This versatility of home styling makes modular homes ideal for inner city living, where there is a diversity of residents – young professionals, families, and older downsizers – all searching for their perfect home.

The downsides of modular homes?

Modern technology has improved today’s modular homes by leaps and bounds when compared to those of the 1940s, 50s, and 60s. They can be built faster, with a higher quality, and produce less waste.

However, the overall cost of modular homes is not cheaper than traditional homes, and financing of developments can be difficult. Even so, large-scale investors like Legal & General are teaming up with developers and housing associations to invest in modular homes.

Investment funding is a godsend to many developers building modular. This means less of their own money must be put down upfront to order the properties.

The big benefit for property developers

The biggest benefit for property developers is the reduced delivery times. This means they can sell or rent quicker, thus achieving positive returns sooner. There is also a lower reliance on a scarce traditionally skilled labour force.

Faster, lighter, and more eco-friendly

The benefits of modular building rack up:

  • Development delivery times are greatly reduced with modular building methods – some homes have been made ready for buyers within six days after the site has been prepared
  • Using either timber or light steel panels, buildings are lighter, too
  • Deliveries of building materials are slashed, reducing traffic congestion and pollution
  • Modular building is leaner and greener

Such benefits make developing inner-city sites – where brownfield costs are sending developers skybound – a more viable proposition. Developers can more easily build upwards, and this will mean a more effective ROI on the cost of land.

Made to measure for the next generation of development

Some modular manufacturers are already examining modular building as a solution to the next phase of inner city development – building on existing roofs. The Mayor of London has proposed that two storeys can be added to buildings where the skyline would not be adversely affected.

A modular rooftop building of 1,200 square feet is estimated to cost around £200,000, and like other modular designs can be customised to the buyer’s/occupant’s wishes. Once in place, it can be sold or rented at market value – and in London, this could provide an exceptional route to help relieve the housing crisis in the capital while boosting developer profits. Such a solution, where so many benefits, must surely be applauded.

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 – investors who applaud the advance of modular housing developments.

Live with passion

Brett Alegre-Wood