Category Archives for "News"

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

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

How can developers exploit game-changing PRS?

Considerations to maximise profits in the PRS market

The private rented sector (PRS) is growing rapidly in the UK. Homebuilding hasn’t kept up with demand, and a combination of evolving lifestyle requirements and affordability issues has changed the UK’s property landscape.

Reacting to a housing shortage that has warped into a housing crisis, the government is doing all it can to promote the PRS. Consequently, housing developments designed solely for the rental market are increasing in popularity. Here we examine the PRS opportunity, and factors that developers must consider to exploit the sector and governmental support, it is receiving.

PRS development profits are smaller than built-for-sale profits… aren’t they?

It’s a misconception that PRS profits are smaller for developers when they build to sell. However, those developers who pre-sell a whole development to institutional developers could be missing out on the benefits of rising property prices and increasing demand through a development’s life cycle.

By similarly treating the off-plan sales process to developments that are built predominantly for home buyers, you can maximise profit potential. However, developers must consider the different needs of renters when planning and building a PRS development.

Consider the target market

The major demographic in the PRS market place is the 25 to 35 age group. These are the people who have left home, completed their university education, and started on their career path. They want to leave their parental home and strike out on their own. These young professionals want an affordable home, a secure tenure, and lifestyle amenities that are close.

However, developers would be wise to target other social groups, too. For example, buy-to-let property investors are targeting the silver renter, baby boomer retirees and near-retirees who are relocating. Often, these renters have chosen to sell their own home and downsize to release equity and improve retirement finances.

Consider where renters want to live

Whichever end of the age scale, whether working or retired, today’s renters are insistent on location. They want to live near local transport hubs that can transport them easily to work or leisure facilities. In London and major towns and cities, the most successful PRS developments are medium to high density in one or more buildings, which also benefit from proximity to nightlife and leisure facilities, bars, restaurants, etc.

Consider the lifestyle requirements of the target market

Lifestyle is important to renters. Developers should consider how they can create community and a sense of place. It differentiates it from built-for-sale developments. Lifestyle amenities include communal spaces, gyms, concierge services, and so on. As well as providing a sense of community, such facilities can also generate extra income. They also tempt property investors, who understand that advantages of buying in a development that creates a sense of place attract longer-term renters, reducing void periods and maximising rental income.

Consider building management and home design

PRS investors, whether individuals or institutions are income seekers. They want to benefit from income over the long term, in an investment opportunity that helps to protect their investment. Maintenance of communal spaces and general building management are important considerations and will increase a development’s investment potential.

Developers should also seek to maximise space by innovative and creative unit design. Sizes and location should be considered. These will impact rental income potential. Investors also want flexible design, and the ability for some customisation will enhance their opportunity to ‘microtarget’ their ideal renter.

Consider the materials used in the build

Finishes must be high quality and designed to last long term. It is true of unit fixtures and fittings. It is also true of building materials, and the Grenfell Tower tragedy has highlighted the need for developers to build with the safest, most modern and highest-quality materials.

Consider how to take advantage of government support for PRS

PRS is now a mainstay of the government’s housing policy. It is committing billions of pounds to support PRS development across the nation. Housing zones have been targeted, with public land earmarked for release. Planning requirements have been relaxed to speed the process of development. Central government and local authority budgets have been set aside to improve the public realm and boost infrastructure, with transport, recreation and education top of the list. Developers that access these locational opportunities will attract the greatest interest from property investors.

Consider how to sell your PRS development

Institutional investors will usually insist on purchasing an entire development. They partner with a developer, providing finances for the development to start and move to completion. However, not only can this limit the profit potential for the developer, but it also increases risk.

There are several examples where the institutional investor has pulled the plug, and the developer has then had to restart the process of finding a partner investor (see Martin Sadler’s article, “UK property developers can be terrified by institutional investors”).

If a developer could sell to a range of individual investors simultaneously, they could offer the PRS development in stages, selling more as the development moves nearer to completion. It should allow the developer to increase sales prices, and maximise PRS development profits.

How does a developer access a multitude of individual investors?

The challenge for developers is not selling their PRS development but selling it well. Selling in one hit to an institutional investor may work for some developments, but it is unlikely to be the best strategy in all cases. It is the easy route – accessing large numbers of individual investors is hard work, and takes years of relationship building.

This is where Castlereach and our partners excel. Gladfish have sold nearly a billion pounds of investment property to investors at home and abroad. They have worked with investors for years, providing investment education, research and mentorship. Their list of investors may be among the most extensive in the UK property investment market.

We leverage this investor reach for the benefit of developers, enabling you to forward sell 25% or 50% of a PRS development. The decision can be made within days. You get the upfront funding you need, enabling you to maximise profits by selling the remaining development at a later stage.

Contact us today on + 44 207 923 5680, and we’ll help you leverage our investor access to maximise your PRS development project profits.

Live with passion,

Brett Alegre-Wood

If you had 3 questions to ask Phil Hammond what would they be? Here’s mine!

Heading across to the summer fair last weekend in Chertsey, Surrey, and our local MP and current Chancellor of the Exchequer pulled up outside my house. Not a regular visitor I must admit but a fortuitous meeting none the less. He had time to answer some of those pesky questions that I’m sure he is always asked “will you be the next Prime Minister?” for example.

I managed to delve a little deeper into property policy and the reason why small landlords with just a handful of properties were being taxed so disproportionately. My question was simple, why in just a few short years have the conservative party turned the country from a nation of homeowners to a nation of renters? Why are the conservatives making it difficult for everybody to make money from property, own multiple homes, complement their extremely low pension?

The answer was that the increase in values of homes and the lack of supply has led to affordability issues that only major providers of rental accommodation or PRS will be able to manage. Essentially the Government can earn more from PRS in tax, than smaller landlords and so they are handing the property market to the large corporations.

So how to dissuade people from owning multiple properties… tax them – even harder.

I am an ardent conservative supporter, but as a property professional, I have to question the measures this government have taken with regards to property investment, home ownership and stamp duty. It appears on the face of it to be a few giant leaps too far.

My concern which is echoed by Brett’s thoughts is that despite all this I’d rather be one of the ones owning a portfolio than renting and for this reason, we still see property as the only viable alternative for most investors now and even more in the future.

Feel free to discuss in the comments.

Alistair Burchett

How to smash your 2017 off-plan property sales targets

Increase off plan property sales and value in a challenging market

With recent news confirming that new housing in the UK has topped 200,000 and planning permissions are running at 275,000 a year, next year could be a tough year for your off-plan property sales.

In London, the shenanigans surrounding Brexit continue to haunt the market. While the number of new builds appears to be curtailed in the capital, so too is the number of transactions. Taken in combination, these factors should help to keep prices from falling. Indeed, recent figures released by estate agent Haart shows that London property price growth has increased to 7.6% over the last year, while demand has fallen by more than a third.

Across the rest of the UK, a similar pattern is starting to emerge, though while demand has fallen slightly, the number of new build properties coming to the market is increasing.

The secret for property developers to increase off-plan sales is having a good, consistent sales strategy that adapts to make sure your new build properties stand out from the crowd. Having discussed a sales strategy to grow your off-plan sales in 2017 in my last article, in this article I want to look at how to make your off-plan and new build developments highly sellable – and then get them sold.

Highlight your unique selling point (USP)

One of the problems that today’s home buyers voice is that one development is very much like another: the same layout; the same property dimensions; the same fixtures, fittings and white goods. When faced with such a ‘non-choice’, the buyer usually goes with the best value option.

Your USP helps to command premium prices in the face of stiff competition. We’ll be able to highlight these to investors from the UK and overseas, providing evidence that supports the USP as an exceptional buy-to-let investment opportunity.

Distinct style and design features that make properties more sellable include:

• Extra and innovative storage space, particularly in kitchens and bedrooms
• Convenience items – think outside the box, and include things like bin shoots, remote control lighting and heating, etc.
• Rooms that benefit from a lot of natural light
• Open-plan living space
• Green features

Add a touch of luxury

There are plenty of design and interior features that can be added to increase the ‘feel’ of a new build. People love luxury features – a “hero” component they can boast about.  A little touch of luxury sells to both home buyers and renters. Don’t underestimate the potential of luxury to turn on property investors who want to benefit from premium rental prices.

Common areas in apartment blocks: swimming pools, gyms, and rooftop gardens are all luxury features that help off-plan property sales. Within an apartment or house, consider a library or study, top-of-the-range appliances, smart heating and lighting, etc.

Consider price and design

It’s hard to sell an off-plan property as a bargain. It is, after all, effectively no more than a concept − a box of air that is captured in artist’s impression and a floor plan.

When we recommend off-plan properties to investors, we discuss the local area, its economy, and property fundamentals – shops, schools, transport links, major employers and major investment. We’ll also talk about the property itself.

A design including luxury features provides great talking and selling points, but as a developer, you should also pay attention to floor space layout – long halls reduce living space, while cleverly designed storage increases it. Available living space increases usable space and value which sells properties.

For off-plan properties, size matters

Some developers seek to maximise profits by maximising the number of units they build on a site. They’ll go for 50 one-bedroom apartments rather than 25 two-bedroom apartments. But consider this: those 50 one-bedroom departments need 50 kitchens, 50 bathrooms, and 50 sets of white goods. That’s a lot more expense in kitting out a block of one-bedroom apartments. And a lot more units to sell too.

Two-bedroom apartments garner more investor interest, too. They’re easier to find tenants for and command a higher rent.

When you’re planning a development, think about size long and hard – if you’re aiming at the student market, then one-bedroom places may be the way to go. But if you want to generate maximum interest from the UK and overseas investors, then size matters.

To park or not to park?

There’s a move towards zero parking spaces in London. Millennials are more likely to use public transport (especially with the Night Tube now providing 24-hour travel options and property investment opportunities for investors). Outside London, parking spaces are more important.

Consider target markets, location and local transport links, and then decide on whether to offer parking for all, a limited number of spaces, or none at all. The extra space freed to build extra apartments (or enhance the size and design of those planned) may pay dividends, but if it makes your off-plan properties harder to sell then it could be highly detrimental to sales (and profit).

Make your new build properties energy conscious

Traditionally, energy-conscious homes have been more attractive to home buyers than investors. We’re beginning to see this dynamic changing. As utility bills take up a larger slice of household expenses, renters are getting energy conscious. Energy-efficient homes sell more easily to tenants and command higher rental prices.

Do your research and provide it to investors

One of the things we do here at Castlereach is research property investment opportunities and relay that investment to investors. We make sure our investors know why your development is an ideal property investment opportunity and the property fundamentals that off-plan purchases will benefit from now and beyond completion.

The developer’s research will highlight why the apartments are in demand locally. Look at the local market, the demographics, the local employers and the population that make up the average homeowner or tenant. Investors want to buy off plan properties that benefit from natural demand, and not be blighted by being the wrong size in the wrong location.

UK off-plan property sales still attractive for investors

People in the UK may be reticent about buying homes at the moment (perhaps because of the economic uncertainty caused by Brexit), but property investors are increasing their activity. It is especially true of overseas investors. Recently, Skipton International announced an 80% increase in mortgage applications from British expats between August and November. That growth in interest mirrors our experience at Castlereach.

Overseas investors are benefitting from the slide in the pound. They haven’t been made nervous by the thought of the UK outside the EU. The demand for homes looks set to continue to outweigh the supply.

Find an edge to push your off-plan property sales through the roof

When looking for the edge that will help drive off-plan property sales, finding your USP and designing properties that appeal to buy-to-let investors will be a key theme in 2017. So, too, will your ability to attract investors from the UK and overseas.

While the fundamentals that make new build developments an attractive investment are the same for investors from the UK and overseas, how off-plan properties are marketed to different cultures requires individual approach and evolved strategies. That’s where our property consultants come into their own – we have huge reach within high net worth investment communities as well as the experience and strategy to sell your off-plan property, off market within agreed timescales.

Contact us today on + 44 207 923 5680, and we’ll be happy to discuss the help and expertise we can offer you as we link the best developers with active investors in the UK and overseas.

Live with passion and fun,

Brett

Your off-plan property sales strategy for 2017 and beyond

An off-plan property sales strategy to increase sales

We’ve helped property developers sell over £800m of off-plan property to an investor base from around the world with a substantial number going to UK based investors. We’ve held property investment seminars in six countries, and sold off plan property for over a hundred property developers and several hundred schemes.

Helping property developers get new build developments financed and off the ground we offer property investors off-market and exclusive investment opportunities. Investors from the UK and overseas understand that we work with great developers, with the properties we source benefit from great property fundamentals in highly researched and specific areas.

We can’t and won’t stand still, just as property developers continually evolve and change practices, we are continually growing our investor client base, innovating our off-plan marketing strategies, and forward-planning sales strategies. Here I want to give you a peek into just some of the plans we have to increase your off-market, off-plan sales in 2017.

Review your investor profile

Our clients are UK and overseas property investors who understand property investment. They know that, despite negativity surrounding Brexit, the UK offers a stable environment for long-term investment. Our overseas investors, in particular, have not been surprised to see that post-Brexit London off-plan development sales are holding.

We understand the profile of most active investors changes over time. Regulations, market events, economic cycles and foriegn exchange rates have separate and combined effects. We’re continually researching, analysing and examining who the most active investors are. Our team use this information and insights to determine marketing strategies and focus on developing our investor database.

Understand why the investor buys your property

Our property consultants spend a lot of time getting to know your development, the area, the story behind it and the particular qualities it has as an off-plan property investment opportunity. We spend a lot of time understanding our investors’ objectives, their aims, and the journey they take to get to making the investment.

We take this journey seriously, mapping it out and understanding the conversations we need to have to move from one stage to the next.

Again, this is something we constantly review – and backwards! We start at the end point (exchange of contracts) and move back through each step needed. We iterate, innovate, and evolve off plan property sales strategies to develop a fully rounded sales conversation. We get to understand the strings we need to pull and why, the objections we’ll come across and the true motivations property investors have.

Something we’ve know is that there is no ‘one size fits all’ approach possible – with different developments, completion times and locations – when you consider property investors are from across the UK or overseas, each has their own motivations, cultures and customs which need to be accounted for.

Property investors prefer different contact methods

We communicate with our investors in a variety of ways, including:

• Seminars and events
• Content or inbound marketing
• Email outreach and campaigns
• Promotion and advertising
• Telephone or online chat / instant messaging
• Face to face meetings and catch ups

Different investors prefer their property consultant to use different contact methods. We’re careful about the type of contact we use at each stage. Off-market sales requires discretion and a lot of personal contact and time is invested between the property consultant and client – otherwise, they cease to be off-market.

Our USP or unique selling point

Investors buy through Castlereach because we offer them something different – off-market and off plan property investment opportunities. Our property consultants are personable, dedicated, and highly experienced. With more than five decades of experience between them, they’ve invested in off plan property themselves and they’re international.

We get close to property developers, understand the local market and have some of the best research in the property investment industry available. Our investors benefit from all of this. We understand that our customers know what they want, so we ask them. We find out why they deal with us, which helps us to grow our investor database. By offering what investors want and investment properties they can’t get elsewhere, we have incredible understanding and reach. That how and why we help property developers with their off-plan property sales.

Review of website and marketing materials

We’ll make sure that our website, landing pages, area guides and marketing materials speak to investors in the UK and overseas. We’ll review them in line with investor profiles, changing markets, and evolving technology.

Creating a brand that is synonymous with property investment, consistent throughout, but appropriate for a range of investor personas requires a 360-degree review – website, social media, print, email, etc. We’re continually innovating new ways for all our channels to be effective and materials to be informative, attractive and educational, as well as promotional.

Our Off Plan Property Sales Process

We are continually innovating and evolving all aspects of our sales and marketing. We encourage sharing of best practice, writing engaging materials and introducing new processes into our sales strategies. From initial contact (often by referral) we nurture prospects as we discover what their unique challenges and objectives are. Throughout, we’re building a profile for the property investor that allows us to target specific investors with specific off-plan property investment opportunities and developments. This sales funnel filters down to commitment and almost-certain sales targets for your off-market properties.

Tracking progress, evolving sales strategy

We’ve some stretch sales targets for next year. Individual property consultants here are responsible for hitting them. Every week, we review activity and progress as individuals and as a team. At team meetings we’ll be discussing successes and failures, learning from mistakes, ensuring that everything we do is aligned to meet our objectives: to sell more of your off-plan property off-market.

What are you doing to increase your off-plan property sales in 2017?

When it comes to working with individual developers, we understand all developments and each developer’s objectives are individual. Unique. That’s why we build flexibility into all of our sales and marketing strategies, to allow for flexibility when working with different developers so we dovetail with their expectations not ours.

We’ll work with you to identify the strengths and weaknesses of your development, and use this knowledge to identify investors with the highest and most appropriate need for your off-plan property opportunities. Collaborating closely, we’ll target a list of interested investors without going public. We don’t advertise and we leave all your current sales channels unaffected. You’ll get the early-stage investment you need, while our investors benefit from their investment in great property, in strong locations with all the information they need to hold on to their property for years to come.

Contact us today on + 44 207 923 5680, connect with me on LinkedIn. We will outline how we dovetail with your existing marketing and sales strategies and importantly, how we can help sell your off plan units, fast.

Live with Passion,

Brett Alegre-Wood

Increase off-plan sales and take the luxury bubble bursting opportunity

Adaptable strategies to maximise new build sales

According to the Land Registry, the luxury end of the London property market has finally burst. Super prime sales have collapsed, but it’s not Brexit that’s to blame. With tens of millions in property developments designed for the high-end market remaining unsold, developers have to employ remodelling strategies to shift and sell their developments.

Here I’ll look at how the bottom has fallen out of London’s luxury property market, and what developers are doing to sell their developments. You’ll also discover how we work with developers to create strategies that sell.

Stamp duty stomps all over luxury development property sales

When the government increased stamp duty rates, it did so in the hope of reducing the number of additional properties bought. The idea – at least publicly – is that this will deter investors and leave more housing stock on the table for ‘genuine’ home buyers.

In the run-up to the introduction of the additional stamp duty land tax of 3%, buyers rushed through their purchases in March. Investors avoided the extra stamp duty, and the property market went through a month of incredibly high sales numbers. The extra demand helped to push property prices higher. Sales for two or three months suffered because purchases had been rushed through the market early. We also had Brexit in between.

A lot of market watchers blamed the fall in property investment transactions on Brexit, but with property market transactions now normalising again, it’s clear this wasn’t the case.

At the luxury end of the market, the so-called ‘super prime properties’ worth £10 million and more, sales have collapsed. In the three months to August 2015, there were 35 properties sold in the luxury bracket in London. This year sales have hit the rocks. Only five £10 million-plus properties sold in London in the comparable period. This lack of interest has also hit prices paid – an average of £16.3 million this year compared with £22 million last year.

The hardest hit in the luxury sector has been new builds – not a single one has sold.

Deflation of the bubble was inevitable

Prices of high-end luxury property in London have increased so far, so fast, that a correction was inevitable. Prices at the upper end of the market are always the first to be hit. With a review of non-dom inheritance tax on the cards, it’s unlikely that this end of the market will bounce anytime soon. Some analysts are predicting a multi-year lull in luxury home prices; and not only in London but across the UK.

Lower sales numbers at these higher prices might dismay the government (it will collect less stamp duty), but it could be devastating to developers who haven’t got a plan B. This is where revised off-plan property sales strategies come into play.

Deflating your luxury property could inflate your sales

We’ve found that the death of billionaire buyers is prompting developers to evolve their plans, and it’s working. As super prime sales have fallen, we’ve found that investment interest in smaller, more affordable properties has increased. It is especially the case from our foreign investor base, which has benefitted from the fall in the value of the pound. Off-plan property sales have suddenly become 20% better value. (Read more in our article “Foreign property investors demand new build property post-Brexit”.)

Developers are remodelling their projects to appeal to the lower end of the market, where investment is still strong. It means creating four or more apartments from one, with lower price points that appeal to a different investor profile. There are planning hurdles to overcome, but once these have been ironed out, the developer can employ a range of strategies to sell to a more engaged audience.

Working hand-in-hand with developers

While the developers we work with have been building new developments in the best places and to the highest standards, we’ve been developing an excellent network of investors at home and abroad who turn to us to benefit from off-market property investment opportunities.

We discuss marketing plans with the developers and then swing into action with some sales strategies that protect the integrity of the development while increasing off-plan property sales.

We discuss property fundamentals (shops, schools, transport links, major employers and major investment) with the investor, relating how the developer’s property offered fits into the growth and income producing bracket that our investors are seeking.

Our investors rely on us to source incredible and exclusive deals – they take on a larger risk because we’re able to offer them ground floor opportunities that have real rental appeal in the long term. These investors aren’t for flipping; when it comes to selling your next tranche of off-plan properties, you won’t find you’ve got unexpected competition for buyers’ signatures.

Foreign investors are the lifeblood of off-plan property sales

We’ve seen a sizeable increase in enquiries from foreign property investors. They’ve been buoyed by the fall in the value of sterling. Despite the Brexit negativity in some quarters, the UK is still a great place to invest. Housing demand outstrips supply, we benefit from a stable government, and there’s an entrepreneurial spirit that is the envy of the world. The UK is the fifth largest economy in the world, and Brexit is unlikely to change that.

Meeting the challenges of off-plan sales together

Developers face some challenges. Working with local councils to source the best locations for development is among them. But the UK needs more than 1 million new homes, so the opportunity for developers is very much alive.

Property investors are interested in off-plan property in the best locations. That means buying property that benefits from nearby shops, schools, and transport options. Our investors expect these fundamentals to be present; repositioning difficult-to-sell super prime properties is a strategy that is likely to create units that investors want. We can then work together to create a sales strategy that compels investors to invest in your newly planned off-plan properties.

Contact us today on + 44 207 923 5680, and we’ll be happy to discuss the help and expertise we can offer you as we link the best developers with the best investors.

Live with passion and fun,

Brett

London – City Hall on side for off-plan property foreign investment

Report could ease pressure on Mayor Kahn when targeting foreign property investors

It’s official – London’s new build developers need to sell to foreign investors. And that’s not Castlereach extolling the virtue of our valuable bank of high net worth foreign property investors. It’s what City Hall says, in a report briefing which has spun Sadiq Khan’s anti-foreign property investment rhetoric a full 180 degrees.

Here I look at the quiet about-turn made by Sadiq Khan’s administration, the research report for which it is calling for researchers, and what it means to developers of new build property and for sales of off-plan property in London.

Why is London property so expensive? … Blame the foreigners!

Londoners may have voted to remain in the European Union and be less visible UKIP than pretty much anywhere else in the United Kingdom, but they are most definitely anti-immigration when it comes to property investment. In a city that is culturally diverse (perhaps the most in the world?), Sadiq Khan found it extraordinarily easy to pander to the widely-held belief that London’s high house prices have foreign investment to blame.

Blaming foreign investors for high property prices is a capital city pastime, the topic of dinner parties and catch ups with friends. Embedded in the mindset of most Londoners. A 2014 YouGov survey found that almost half of Londoners felt the cause of house price inflation was the fault of foreign property investors and speculators. It probably runs counter to what you’d expect from a city where more than a third of its citizens were born overseas.

Mayor Sadiq Khan promised a review of the effect of foreign property investors on the London property market, and the hunt to source research is firmly underway. But the wording of City Hall’s research briefing indicates a softer and more welcoming approach to property investors from abroad. It also confirms the possibility that foreign investors might be good news for the London property market! Who’d have thought?

City Hall welcomes foreign investment into London off-plan property

The City Hall’s Housing and Land Directorate’s briefing says “We welcome investment from around the world in building new homes,” and while it acknowledges people’s concerns about foreign property investment in London, it also says that “The GLA wants to ensure any discussion of policy responses is underpinned by clear evidence and understanding.”

There are four areas the report examines and attempts to clarify with clear evidence to produce that understanding:

• How many new homes are sold to property investors from overseas?
• How many new homes owned by these investors remain empty?
• How reliant is new build development of foreign property investors?
• How does overseas financing contribute to the supply of homes?

The briefing accepts that “Off-plan sales are an important part of development viability. Industry bodies report that development finance can be difficult to obtain until 40% of units have been reserved and that most developers will not start construction on a development until a third of its units have been pre-sold.”

It admits that there are reports of the active role that foreign investors play in the new build property market, and wants to quantify their role.

Will the report be important for developers?

Sadiq Khan has made a big play of his desire to clamp down on foreign property investment into London. However, the briefing for the research role could give Mr Khan a heap of news and statistics that he wasn’t expecting to hear, but that he might want, now he’s had time to meet with industry insiders, property developers, estate agents, and others.

The reality is that the ability of new build developers to build the supply of homes that London needs relies on foreign investors. For Sadiq Khan and City Hall, this is an important concept that they are starting to understand. It’s real important for Mayor Khan because what he wants to do is build more affordable homes for Londoners – and that needs the developers on board. Right now, a big number of those affordable homes are built only as a condition of the permission for other new build properties given to developers.

An example of an affordable housing initiative in action is the development of the Aykon London One Tower, south of the Thames. It’s 50 floors of apartments are priced at up to £4 million. However, as part of the deal, Lambeth council gets 90 affordable homes. Without the luxury flats, those homes would not have materialised.

So, for sure the report will be relevant to developers – but it will also be important to Londoners. Perhaps it will be most important to Mayor Sadiq Khan: he’s promised a review, and he’s promised more affordable housing. Somehow he may need to extricate himself from blaming foreigners for London’s high house prices – what better way to do that than by an independent report that shows foreign investment is an integral piece of London’s property landscape?

A favourable report will likely kick into touch all the talk of penalising foreign property investors, and that will allow developers to continue to develop new build sites backed by foreign investment into off-plan property.

Foreign investors support new homes for Londoners

Off-plan property sales to investors – both domestic and foreign – help to fund development projects. These projects have created around a third of all affordable homes built in recent years – and that’s according to the GLA!

However, the GLA and Mayor may well have a point when they express their concern about investors buying property to leave empty. We’re not sure why investors would want to do that – our foreign investors are serious about making money from their London off-plan property purchases and want to tenant them after completion.

London’s property market has long since relied on foreign property investment money. Without investment from the Far East, Europe, and the United States, residential developments such as those in the shadow of Canary Wharf’s towers would never have got off the ground.

Will Mayor Sadiq Khan’s review harm foreign property investment?

It’s probable that the review ordered will be mostly accommodative to foreign property investors in London. The industry has already told the Mayor that it’s needed. He may have started to realise just how much his plans for more affordable housing rely on the ability of developers to continue building new build at a range of price levels. And that development relies pretty heavily on foreign investment, especially into off-plan property opportunities that support funding for entire projects.

The mayor may try to provide some solace to Londoners by instigating penalties or restrictions of some kind on investors (foreign or otherwise). In reality, there is probably little he can do. Calls for rent regulation, higher taxes on land, greater borrowing powers for local authorities to build, and harsh council tax penalties would all need central government legislation. That’s highly unlikely to be forthcoming.

Londoners want what Mayor Sadiq Khan wants: greater numbers of better homes, and more affordable housing.

Instead of butting heads with developers and being forced to fight foreign property investors, the report that City Hall has ordered may give the Mayor reasons to be more accommodative to developers and the investors in their off-plan property. Finally, investment by foreigners may well be seen to be positive for London’s property market at all price points, and not the sole reason for property price inflation.

To connect with us and our access to an active foreign investor base, call my team direct on +44 207 923 5680.

Keep in touch and connect with us on LinkedIn.

Live with Passion,

Brett Alegre-Wood

Post-Brexit London off-plan development sales are holding

Increasing your off-plan sales post-Brexit

For several years the UK housing market has been diverging into a two-tier affair. On the one hand, you have London property, and on the other, you have the rest of the United Kingdom. Post-Brexit, it looks very much like London off-plan developments are being polarised into two distinct sectors: domestic investment and foreign investment.

Here, I’ll discuss and distill some of the recent news that supports this view, and examine how property developers in London take advantage of this new dynamic.

The UK house prices: a two-tier market?

According to the Nationwide House Price Index, in the UK, regional and London house prices tracked each other between 1973 and 1996. Apart from a blip in the mid-1980s when London property prices broke higher temporarily, property values across the UK increased at the same rate.

But since 1996, when it became apparent that the UK would not join the Euro, London property prices have outperformed prices across the UK regions. From an index base of 100 in 1995, the London House Price Index has risen to more than 700, while the UK House Price Index has increased to a shade more than 400.

There are some factors for this massive outperformance. Primarily these reasons focus on the financial sector. As it became apparent that refusing to be a euro currency member would not damage London’s status as a financial centre, and contrary to expert forecasts at the time, investment into London property increased.

We see this dynamic repeating now, but with a much more polarised focus. London is – at least in the short term – a mecca for foreign investment into property.

Off-plan development sales slump… or is it?

Figures released by Molior London in mid-July showed that the number of off-plan properties sold in the second quarter of 2016 (ahead of the EU Referendum) fell from 6,974 to 4,600 from a year earlier. This was partly blamed on uncertainty ahead of the Brexit vote, but mostly on the continuing effects of the 2014 tax hike. On top of this, stamp duties were raised on higher value homes, and changes to the way that buy-to-let mortgages are taxed also had an effect.

Since Brexit, agents have reported a divergence of interest in London off-plan developments. It has been reported that as many as one in eight buyers of property under construction have pulled out of the deal. These are domestic, UK-based buyers. They’re nervous of what Brexit may mean to house prices in the London market.

Meanwhile, foreign buyers have flooded in. This was forecast in an excellent article by Brett Alegre-Wood, who anticipates that Brexit has the potential to create a once-in-a-lifetime opportunity for investors in off-plan property in London. In that article, Brett points out that:

• Demand for off-plan property in London from foreign investors is likely to increase
• Long-term demand from renters and homebuyers in London will remain strong
• Off-plan property in London represents excellent value to the investor

Mirroring these forecasts, London’s agents are reporting a huge uptick in foreign investor interest in off-plan developments in the capital. The pound’s collapse has put London property firmly in the bargain bucket as far as foreign investors are concerned. Some agents have reported a spike of 50% in enquiries for properties.

How to stop your London development from being mothballed

Some property developers have reacted with extreme caution towards the Brexit vote. Some have mothballed projects, while others have said that they will reduce the pace of building. This offers some developers an opportunity to make hay while the sun shines.

On 11^th August, the Royal Institute of Chartered Surveyors (RICS) reported a softening in house price growth and falling prices in London. But interestingly, in the same survey, it said that its sales and price expectations on a twelve-month view have risen. In other words, the current softening of the market looks more cyclical than systemic.

Developers who strategise for off-market off-plan sales to foreign investors probably won’t have to mothball any developments. They’ll benefit from:

• lower competition in the market;
• continuing demand for long-term rentals and from homebuyers; and
• expectations of a return to the growth path within twelve months.

Here at Castlereach, we’ve also seen enquiries for off-plan development property in London increase. As I’ve discussed recently, UK property investment is high on the list of our foreign investors. Now is the perfect time to get in touch and implement a bespoke off-market, off-plan sales strategy that taps into this rich vein of foreign demand. Don’t mothball, market!

Call me direct on +44 207 924 5680. Our foreign investors have specific investment needs which London property satisfies.

Live with passion and fun,

Brett

Why off-plan property London still sells post-Brexit

Analysing property investment news and the facts as we know them

Depending on what press you read, property in new developments and off-plan property London sales are either in for a slowdown or a crash in sales and values post-Brexit. Apparently, some new property developments and off plan properties have been put on ice indefinitely. Others rushed to completion.

Here I look at the latest contradictory news that leads us to believe a ‘steady-as-she-goes’ approach will be the best course of action in the coming months and years.

Headline: “Sales slump that will crush off-plan property in London”

“Housing sales forecast to fall sharply this summer after Brexit vote” chimes a headline from the Guardian newspaper. Citing a Royal Institution of Chartered Surveyors (RICS) survey conducted in June, the newspaper says inquiries and sales fell for the third month running. However, the survey also showed that the supply of properties also fell.

The survey may have revealed the most bearish confidence reading since 1998, with a quarter more RICS members expecting a drop in sales than a rise – but we shouldn’t forget that the survey took place at the height of Brexit fears and approaching the traditional summer lull.

Sentiment among property sales agents of new property developments and their end buyers has also been swayed to the negative side by the effects of recent stamp duty rises. Investors rushing to get deals done before the stamp duty increase meant a slowdown in sales was already on the cards.

Soft landing for property prices

Many expert economists predicted a collapse in property prices after Brexit. In its reporting of the same RICS survey, the Daily Express produced the headline “House prices post-Brexit: ‘More of a soft landing than a crash’”.

It emphasised that RICS members see a softening of prices, but certainly, don’t expect a collapse. Prices in London are the only ones in decline at the moment – that might be a short-term drag on off-plan property in London – but elsewhere they’re still rising.

Off-plan property London prices might dip or remain static for up to 12 months, the survey said, but within five years they are expected to be an average of 14% higher than they are today. That type of forecast leaves a lot of potential for profit for investors in new build property developments – especially for investors looking for capital growth over the longer term and yield in the shorter term. There’s a shortage of housing stock in London remember.

The country needs more homes

We also saw a report from the BBC asking, “How can the UK build more homes post-Brexit?” highlighting the call by the National Housing Federation CEO, David Orr, for “pragmatism and flexibility” in government housing policy. It says that social housing building should increase in response to the fall in private housebuilding.

It puts the spotlight on factors that cannot be ignored by the new property development industry: there is simply not enough supply to cope with demand.

The balanced view for new property developments

Brexit was a shock. It’s causing some uncertainty. Uncertainty leads to fear. But like Warren Buffett says, “Be fearful when others are greedy, and greedy when others are fearful.” There is undeniable underlying demand for homes in the UK.

It’s estimated that we’re building as many as 220,000 too few new homes every year. This dynamic hasn’t been missed by our bank of wealthy foreign investors. For these, UK property investment is high on the list of their investment targets − off-plan property London included.

The slowdown in sales has been caused by three factors colliding at once:

• The stamp duty rise in April and the rush to completion sales that pushed sales numbers through the roof.
• The traditional summer lull in sales.
• The initial uncertainty caused by the Brexit vote.

We’re already seeing signs that the effect of these factors are fading,  fast. The FTSE 100 has pushed way beyond its pre-vote level. The pound has stabilised at a level that creates exceptional value for foreign buyers. There’s a new leader of the government and a Brexit plan is being formulated and communicated.

In the medium to long term, the Brexit shock will be seen as a blip – no more, no less. If you’ve got new property developments underway or in the pipeline, the interest from our investors is saying that you will probably do best by steering a steady course as you navigate through the Brexit fallout.

Where others are fearful, we’re pragmatic. Where others are greedy, we’re analytical. If other developers do pull back, that’s more demand for your off-plan sales.

Call us today on +44 207 923 5680 to discover how you can reach out to our bank of foreign and UK based property investors.

Live with Passion,

Brett Alegre-Wood