Category Archives for "UK property investment"

why-property-developers-should-not-dismiss-the-IPPR-housing-policy

Why property developers should not dismiss the IPPR housing policy

Left-wing ‘blame-thinking’ could make new home sales harder

If the Conservative government collapses and a Corbyn-led Labour party is voted into power, property developers may be forced to work under a new regime in which the Bank of England targets zero house price inflation. At least, this is the hope of a left-wing think tank, the Institute for Public Policy Research (IPPR).

IPPR started pushing for affordable housing reform in November 2017

In November 2017, the IPPR published a report titled “Priced Out? Affordable Housing in England”. In that document, it noted that only 71% of England’s demand for new homes was being satisfied by new builds by property developers.

It clearly laid the blame for the housing crisis on developers when it said “While other factors, such as money supply, play their part, this is impacting on the affordability of housing. House prices have risen by 76 per cent since 1995, far outstripping inflation (ONS 2017).

While it noted that the product range to make housing more affordable has increased in recent years (e.g. models for rent, ownership and intermediate housing), it made a number of recommendations to increase affordable housing, including:

  • A minimum of 35% of all residential developments be allocated to affordable housing
  • A minimum of 50% of all residential developments be allocated to affordable housing, where the development is on public land
  • Housing companies to be formed by mayors
  • Local authority pension funds to be combined with local authority funds to invest in affordable housing projects
  • Compulsory purchase orders to enable the buying of land at lower values (presumably to enable the housing companies formed by mayors to build using the local authority and local authority pension funds monies)

Now the IPPR want zero house price inflation

The IPPR has not let the dust settle on this report. Not content with recommending the above measures – which may mean that private property developers would get the worst land at the highest prices, and still have to provide 35% to 50% of development as affordable housing – it has now suggested the Bank of England should step in and target zero price inflation over the next five years to increase housing affordability.

In its latest discussion paper, “On Borrowed Time: Finance and the UK’s current account deficit”, the IPPR suggests that the Bank of England take measures such as:

  • Insisting on higher deposits
  • Placing stricter ceilings on loan-to-income ratios

Oh, it also suggests boosting house building.

Zero house price inflation means a fall in real terms

If house price inflation is held at zero, prices would drop by around 10% in real terms, after accounting for wage inflation – assuming wages continue to grow at their current rate. Thus, housing would become more affordable.

Serious questions avoided

The IPPR appears to believe it can wave a magic wand at the housing market. By placing more stringent monetary measures on buyers, it believes that demand will fall. It may very well do.

It also believes that it can somehow increase the number of homes built, in an environment where housebuilders:

  • must provide up to 50% affordable homes
  • face competition for the best land from authority-subsidised bodies with access to the best land at knock-down prices
  • will suffer from house prices that are falling in real terms

The IPPR also doesn’t address what happens after the five years:

  • Should the Bank of England leash be loosened?
  • And if it is, what effect does the IPPR believe the pent-up demand for homes – caused by its policies in the first place – will have on property prices as new buyers flood the market with higher deposits saved?
  • And will these new buyers opt to live in local authority-built properties built for affordability, or private-built properties developed to the highest standards?

It’s a crackpot policy. Maybe it should be described as infantile economics. But could it become government policy? Perhaps only Jeremy Corbyn and Labour can tell us that, but I doubt they would wish to divulge their plans.

In the meantime, property developers would be wise to prepare for a tougher sales environment should the UK electorate lean left in the near future. Contact Castlereach to discover how we can help you to do so.

Call us today on 0207 923 5680

Live with passion,

Brett Alegre-Wood

Could-the-UKs-ageing-population-be-the-property-developers-next-big-market

Could the UK’s ageing population be the property developer’s next big market?

Demographics and international experience point to an underexploited opportunity

I read some research recently, from Key Retirement, that found one in five homeowners aged 65 and older are considering downsizing in the next five years. It also found that most cannot find the home they want. With the UK population ageing rapidly – the number of over-65s is forecast to grow by almost a quarter by 2025 – could this rapidly changing demographic present lucrative opportunities for property developers?

More than half a million buyers are waiting for smaller properties

The research finds that around 620,000 older homeowners want to downsize, but cannot find a property suitable for their needs. According to Legal & General, only 7,000 homes were built for this sector in 2017. Think tank Demos puts current demand at 30,000 per year. There is clearly a large shortfall: one that property developers could take advantage of.

Why do older people want to downsize?

There are many reasons why older homeowners may wish to downsize; some financial, and others for lifestyle. These include:

  • For greater community, easier socialising, and access to leisure activities
  • Worries about paying the bills on a larger property
  • Concerns about maintenance and repairs

It is certainly not the case today that retirement living means taking things easy. Older people want to live near their grandchildren, and while they may desire comfortable homes in which to live, they also want security and to be close to recreational amenities.

What is important to older people?

Older downsizers want somewhere smaller to live, possibly also to release equity from their current home to help fund their retirement. They also desire properties that are large enough for guests and grandchildren to stay over. In addition, they need lifestyle facilities close to hand. This means:

  • Two or three bedrooms
  • A small or communal garden
  • Close to local shops
  • Near to leisure amenities such as bars and restaurants
  • Highly energy-efficient homes
  • Gyms, hairdressers and beauticians within walking distance
  • GP surgeries and pharmacies nearby
  • Little or no maintenance

Security is also high on the list of key wishes.

The types of property that these downsizers are seeking are somewhere between what they currently own and the care home satisfying the health needs of the very old age. Innovative developers could satisfy this growing niche, by building homes that provide comfort, community and security, and which will adapt to life as the resident ages – effectively, building mixed-use developments targeted at the rapidly growing and more affluent ageing population.

Opportunity for property developers and property investors

In other countries, retirement housing is more common than it is in the UK. For example, in the United States, Australia and New Zealand, you’ll find that as many as 20% of retirees live in purpose-built retirement communities. Here in the UK, this number is only around 1%.

If the ageing population of the UK follows the lead of developed countries elsewhere, demand for suitable properties in retirement communities could explode in the UK.

While the majority of such retirement community homes are likely to be owner-occupied, it’s probable that many such downsizers will choose to rent in retirement communities. This presents property investors with a unique opportunity to benefit from what could be lifelong tenants, willing and able to pay premium rental prices for the type of rental property that is currently in short supply.

Building retirement communities could be the next boom sector in the UK housing market. We’ve got the investors who could wish to take advantage of the UK’s ageing population’s housing needs. Have you got the property to satisfy them?

To connect your development with waiting investors, ready to buy today, all you need to do is contact Castlereach. Then let us do the rest.

Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

Why-property-developers-should-target-property-investors-to-boost-sales

Why property developers should target property investors to boost sales

The shift from homebuyer to renter continues in the UK

Property investors have always played a big part in the UK residential market. The role is set to get bigger. As the UK population grows, more homes will be needed. The government knows this and is diverting money and resource to boost new homebuilding. PwC forecasts that there will be 7.2 million households renting in the UK by 2025.

It has long been the assumption that many of those who rent do so as a stepping stone to buying their own home. While this may still be the case, a recent analysis of the English Housing Survey shows that the number of households that believe they will always rent is rising rapidly. This begs the question, should property developers refocus their sales efforts on buy-to-let investors?

1.75 million long-term renters and rising

Of the approximately 5.4 million households that rent in the UK today, 1.75 million now believe they will rent for the rest of their lives. That’s up by 50% since 2010.

This is the conclusion of analysis conducted by the Labour Party. It examined the English Housing Survey, and found that there are almost 600,000 more households that don’t expect to buy in the future than there were just eight years ago. Clearly, government policies to increase affordability and boost first-time buyer numbers is not working as hoped.

At this rate of growth, not only will the number of renters exceed the number of homeowners by 2030, but the number of permanent renters will exceed the number of temporary renters, too.

The owner-occupancy rate is falling

Not surprisingly, the owner-occupancy rate is falling, as it has been since 2003. A number of factors have been blamed for this – including the low numbers of new homes built and the rise in property prices. Even the fall in house prices prompted by the Global Financial Crisis failed to halt the shift from housebuyer to a home renter.

Today, the proportion of homeowners has fallen to 63%, from 71% in 2003.

As the population grows, renting will become the norm

Younger people are less likely to buy today than a decade ago. The fall in homeownership has been most marked in the under-45s. There are now one million fewer people in this age group who own a home than there were in 2010.

Affordability is an issue for this demographic, though so, too, is a lifestyle. Earlier this year, the Institute for Fiscal Studies found that young adults on middle incomes are now less than half as likely to own a home than they were 20 years ago. House price growth has outstripped wage growth to such an extent that homeownership is no longer affordable for many.

In addition, other surveys and studies have found that many younger people choose to rent for lifestyle reasons. They rent with friends, near where they work, and in places where leisure activities are on the doorstep.

Investors could be the major buying force in the UK property market

With homebuyer numbers reducing and renter numbers increasing, clearly, there is a structural shift taking place in the UK residential market. As renting becomes a long-term choice for increasing numbers of households, the attraction of investing in buy-to-let for the long-term increases, especially in the low-interest rate environment.

The UK’s growing population, the inability to build enough homes to meet supply, and the disparity between house price growth and wage growth, are all factors that underpin investment in UK residential.

What type of property do investors want to buy?

Essentially, property investors want to buy homes that are appealing to long-term tenants. These needs are aligned with those of homebuyers – if you are going to live in a property for a long time, you want it to be the right property.

An analysis made by the NHBC and Savills in May this year provided insight as to what it is that people want from a home: whether that home is in a high-density urban location, medium-density residential, or suburban homes within 3km or urban areas. It found that the main factors considered are:

  • Minimum maintenance
  • Off-street parking
  • Location
  • New home warranty
  • Size and design of living space
  • Quality of the neighbourhood
  • Energy efficiency

(Read our article “What homes should developers sell in a bouncing property market?” for more.)

This is the type of property that property investors are keen to buy. To connect your development with waiting investors, ready to buy today, all you need to do is contact Castlereach. Then let us do the rest.

Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

What-property-developers-can-learn-from-ancient-Rome

What property developers can learn from ancient Rome

Could this be the blueprint that helps developers sell more property?

When searching for opportunities for investment on behalf of our database of global property investors, there are many things we look for. These investors want to buy where tenant demand will be strong. This means we’re really interested in developments in key locations. Large towns and cities. Commuter towns. Places that benefit from shops, schools, good transport links, major employment, and committed infrastructure investment.

When explaining what our investor clients are seeking, it’s often easier to provide examples. Our investors are forward-looking, buying for potential. We seek exciting developments that offer everything these investors desire. Sometimes these developments take time to come to fruition. Though still some way from becoming a reality, the proposed Vineyard Gate development in Colchester is a good example of what appeals to our investor database.

Mixed-use development is in demand

The Vineyard Gate site was earmarked for a £70 million shopping centre in 2002. It has never materialised, and last year the plans were finally wiped. Thankfully, Colchester Council has changed direction and now wants to partner and develop a more balanced mixed-use town centre development, combining residential, commercial, leisure and retail. This land is in an ideal location, where investors want to buy property in the UK, and could provide the opportunity to build the types of homes that developers should sell in a bouncing market.

Development that caters for all

Town centres have changed. Their focus has shifted to a people-centric plan rather than a retail-centric. Retail must be flexible, and there must be plenty of recreational facilities – restaurants, bars and bistros included.

Large national retailers are moving out of town, to shopping malls where car parking is plentiful. Town centres are evolving to providers of boutique-style stores, where niche needs are catered for. They are also becoming residential centres. These developments have the potential to attract a wide range of residents, including students, young professionals, families and retirees. Homes built, therefore, should reflect this.

Sites with soul

It is also important that in the midst of redevelopment, these town centre locations retain their soul. This means keeping some of the rich heritage of the location. Riverside developments are popular, as are developments that have a historical connection. At this site, for example, the Roman Wall will be a key feature. A public space, probably piazza-style, will be created in front of the wall. This space could have multiple uses in the future.

The local authorities in Colchester are considering attractions such as museums, art galleries, and restaurants, too.

Transport options are important

Fewer town centre residents have their own transport, but do rely on transport links. Vineyard Gate is a prime example of what might be achieved by such a development. The site could provide a natural link between the bus station and rail station, and then encourage people into the town centre from both transport hubs. This should create a vibrant and buzzing, largely pedestrianised town centre.

Dating back to Roman times, Colchester is the UK’s oldest town. If the revised plans for Vineyard Gate become a reality, it could provide a blueprint for what investors are looking for today:

  • A location that is backed by good transport links, with retail and leisure on the doorstep
  • With such a mixed-use scheme providing commercial space too, the potential for long-term job creation is also improved – especially in the modern digital and creative sectors
  • Provided the new homes built cater for a mixed demographic, this type of development holds much promise for investors

Perhaps property developers can still learn from ancient Rome!

There’s only one problem: Vineyard Gate could still be years away… and we need property for waiting investors today. To connect your development with waiting investors, ready to buy today, all you need to do is contact Castlereach. Then let us do the rest.

Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

How-do-SME-property-developers-access-financing-for-new-projects

How do SME property developers access financing for new projects?

Off-market sales may be the answer to funding difficulty

Last October, LendInvest published a report titled Starting Small to Build More Homes. The report explained how four out of five SMEs in the property sector have disappeared since the last boom in the property. In 2016, the proportion of new homes built by small developers (those building fewer than 500 per year) dropped to less than 25% for the first time.

Despite a range of solutions proposed in the report, recent lending figures show that lending to SME property developers is falling. Commercial lender Ortus Secured Finance says that the difficulty to source funding faced by SME developers is adding to the housing crisis.

In this article, we’ll look at the issues facing the industry, and how Castlereach helps developers to get their projects off the ground.

Structural barriers to building homes

The LendInvest report highlighted a number of structural barriers preventing increased supply. These include:

  • Lack of available land, with the number of small sites decreasing
  • Planning, with delays in the planning application process, cited as a particular issue
  • Difficulty in employing skilled labour, with a third of companies believing that Brexit will cause further labour force problems
  • Lack of financing, with lending conditions scoring only 1.63 out of 5

Is the government doing enough?

The government is acting to tackle the housing crisis. Its policies are aimed at easing the three main barriers to building new homes:

  • It has committed more money for new homes. The Autumn Statement confirmed that 44 areas are bidding for a slice of the £4.1 billion Housing Infrastructure Fund. It also committed an extra £1.67 billion for London, specifically for building more affordable homes.
  • It is overhauling the National Planning Policy Framework (NPPF), attempting to promote greater collaboration between local authorities and property developers. The aim is to fast-track the planning process.
  • The NPPF will also compel local authorities to release more brownfield land, especially for high-density use.

So, more land being made available. More money for housing development. Faster planning.

On the face of it, these policies appear to have had a positive effect. New build completions soared in 2017, and the sector has responded to the negativity surrounding labour shortages by employing tens of thousands of new recruits (HBF).

Lending to SME property developers falls by almost 10%

The actions taken by the government and the dynamic way that developers have responded to potential issues caused by Brexit is great news, so it’s incredibly disappointing to see that lending to SME property developers has fallen.

According to lender Ortus Secured Finance, lending to SMEs in the property sector fell by £1.2 billion, to £12.7 billion in 2017. It’s not like lenders aren’t lending to SMEs. While overall lending to SMEs is down by 2%, lending in some sectors is booming. For example, lending to SMEs in the manufacturing sector is up by 11% to £6.3 billion.

Ortus says that lack of funding is adding to the housing crisis. In London, only 33,000 homes were built last year – half of Mayor Sadiq Khan’s target, and this despite the Mayor’s focus on smaller sites that should be conducive to building by SMEs. So, if you’re an SME developer, where can you get the financing to kick-start your development?

Welcome to off-market sales to investors

Our investor base is keen to get in on the ground level of new property developments. We’ve got investors from the UK and abroad who are backing the property market in the UK to continue performing well through Brexit. They understand that buying early has many advantages. For developers, the advantage of connecting with these investors is the early-stage financing it provides; the boost that lenders seem less willing to provide.

To connect your new development with waiting investors, ready to buy today, all you need to do is contact Castlereach. Then let us do the rest.

Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

Where-might-savvy-property-developers-target-interest-for-off-plan-sales

Where might savvy property developers target interest for off-plan sales?

The latest property research gives clues to increase sales

Housing shortfall is higher than previously estimated. Demand for rental properties is growing rapidly. And foreign investors are snapping up residential property in the UK. Recent research shows where property developers should focus to increase their sales.

The UK needs 340,000 new homes every year

Recent research conducted for the National Housing Federation and homeless charity Crisis suggests that the government’s target of 300,000 new homes each year by the mid-2020s is woefully short of demand. And not by just a fraction, but 4 million homes through to 2031. The report concludes that the UK needs to build 340,000 new homes every year for the next 13 years to get to equilibrium between supply and demand.

Where does the demand for housing come from?

While there has been concern about Brexit sucking some demand from the UK housing market, we’ve continued to sell off-plan property post the Brexit vote. We’ve long held the view that demand for homes in the UK is a beast that cannot be slain but will simply grow. Yes, ‘despite Brexit’. Why? Because demand isn’t simply from EU immigrants. The research from Heriot-Watt University comes to the same conclusion. Demand for new homes in the UK includes from:

  • Those who want to buy but can’t afford to
  • Young people moving out of their parental homes
  • Couples who want to have children
  • Homeless people

This is organic demand growth that has been largely overlooked by those predicting doom and gloom post-Brexit.

The need for affordable housing is underestimated, too

The report also provides an estimate of affordable homes that are almost double current estimates: 145,000 against 78,000. This is 42% of forecast housing need, as opposed to the 23% that were built in 2016/17.

Expect a million more renters by 2025 Hamptons International expects the demand in the private rented sector to explode in the next seven years. It predicts that there will be six million households renting by 2025.

Research from UK Finance shows that around 16% of landlords acquire their property without purchasing it. Common sources include via inheritance, couples moving in together, relocating, or keeping a home for investment instead of selling. Given this number, 84% of landlords are property investors.

With more than one million extra households renting by 2025, there could be 800,000+ properties bought by landlords over the next few years – more than 100,000 every 12 months.

To sell your off-plan property, supply the demand

It’s clear that property developers have the opportunity to sell a lot of property to investors. Yet if you read the news headlines, you’d be forgiven for thinking that UK investors are shunning the market. But investors are a canny bunch.

Certainly, the tax changes made on buy-to-let investment have dented some demand from individual investors in the UK. This said, what we’re experiencing is many more investors incorporating to buy property. Individual property investor numbers have fallen, but company investor numbers have increased. However, there is also another source of off-plan investment. Foreign property investors demand new build property as buy-to-let opportunities.

Buying from international investors surges

Hamptons International said that 30% of homes across London were sold to international buyers last year. That’s a big proportion, especially in a post-Brexit market in which confidence was supposed to collapse. What we’re noticing is even more marked. And we’re not the only ones.

Shojin Property Partners have recently reported a 52% surge in the numbers of overseas property investors buying into crowdfunded development projects. They are attracted by high yields, growing demand, and the long-term attractiveness of the UK economy as an investment destination. Further, the weak pound makes their money go a lot further.

Where do the foreign investors come from?

Much of the foreign investment demand for crowdfunded opportunities originate from the Far East, Middle East, and East Africa. Hamptons has seen homes in prime London locations particularly sought after by Middle Eastern buyers.

Perhaps savvy property developers should be targeting foreign investors from these geographies to boost their off-plan sales?

To connect your development with waiting foreign investors, ready to buy today, all you need to do is contact Castlereach. Then let us do the rest.

Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

where-do-investors-want-to-buy-property-in-the-UK

Where do investors want to buy property in the UK?

Matching development type with location to meet investor demand

In a recent article, I discussed two of the key issues currently facing property developers – rising land prices and rising cost of the build, and how they may affect your business plans when coupled with growing demand for homes in urban centres.

Here at Castlereach, we take a different approach to investor sales. We target investors first, aiding their knowledge of the UK property market and helping them understand which properties to invest in. This means that when you want your property sold at an early stage, we already have property investors on our books who are likely buyers. This approach is a major factor in our success in off-market sales.

So, given the current conditions, what type of property investment opportunities are our investor clients seeking? This information could help you as you search for available land at prices to yield sensible returns on your investment.

Urban brownfield sites

The availability of urban brownfield sites is increasing in the UK, partly thanks to government policy enabling local authorities to speed up planning processes. These are great options for residential property developers. However, there are hurdles for developers to jump. The cost of preparing such sites can be prohibitive, and homebuyers may baulk at buying on a previous industrial site.

Our investors aren’t looking for a quick flip. They are seeking long-term buy-to-let properties, and brownfield land is ideal for this type of opportunity. Renters aren’t locked into living on once-upon-a-time industrial land but benefit from the lifestyle advantages of location.

Offering a higher proportion of these sites to investors rather than homebuyers could produce faster and more profitable sales for developers.

Redevelopment sites

We’re finding that redevelopment of current urban locations, especially when combined with regeneration, is extremely appealing to investors. These sites often benefit from a highly attractive location, with proximity to transport hubs and retail of great appeal to investors (people want to live for convenience and lifestyle).

Sites that face green space and those that are river facing are very popular. These tend to provide the best potential for the higher rents and capital growth that investors are seeking.

Greenbelt sites

The government has planned for development on greenbelt land, offering property developers greater potential to meet the housing needs of a growing population. We’ve seen land prices rising on the greenbelt, too (probably something that the government hadn’t anticipated).

However, while we do see some investor appetite for these developments, there are some roadblocks that inhibit investment opportunity. For developers, the costs of development could be inflated, making for a less affordable residential property.

For investors, the key is for such developments to be close to main transport links, and with developments providing for retail convenience. Where these conditions are met, the rural location becomes more appealing for a wider variety of residents, and this provides investors with greater peace of mind.

Where are we seeing highest investor demand?

In terms of geographical location, we’re seeing demand for residential investment property in every region right now.

For reasons that have been well documented, London is no longer at the top of investors’ wish lists. However, we believe that this will prove temporary, and London will, in due course, become a favourite investment location. Notwithstanding this, we still have many investors who want to take advantage of the slowdown in London property price growth.

For our investors, regional cites are flashing brightly on their radar. Particularly, cities like Manchester, Leeds, and Birmingham, where the approaching High-Speed Rail will be transformative. Boroughs, districts, and nearby towns to these cities are also in demand.

Northern towns and cities that offer incredible affordability, with growing local economies and estimates of higher-than-average population growth, are also attractive – for example, Newcastle and Bradford are two locations with keen interest currently.

And, of course, the commuter towns and growing commuter towns serving London. Places like Bedford, which also benefits from being in the heart of the planned ‘brain belt expressway’.

To connect your development with waiting investors, ready to buy today, all you need to do is contact Castlereach. Then let us do the rest.

Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

Migration-out-of-london-the-property-developers-clue-to-investor-demand

Migration out of London – the property developer’s clue to investor demand

Identifying where to build for natural buyers

The flow of people moving out of London is the highest it has ever been. According to ONS data, in 2016 around 198,000 left the capital – that’s 2.25% of the city’s population, and almost double the rate of just 10 years earlier. This year, there are likely to be more than 200,000 people deciding to up roots and live elsewhere. For both property developers and property investors, this level of migration is an incredible opportunity.

Why are Londoners moving away?

There are many reasons why Londoners are moving. Some move because their work takes them away, but greater numbers choose to commute. Others find new employment in new surroundings, where the pace of life is both slower and cheaper.

Indeed, affordability is a major factor in making the move from London. People can afford to commute into London while living in a larger, more spacious property.

Where are Londoners moving to?

Where Londoners move to provides a lot of evidence for where to build and where to invest. For where also shows us what makes a new location attractive.

Most of those leaving London don’t move far. The commuter belt is the favoured destination. Towns like Waltham Cross, Sevenoaks, Maidenhead, Redhill, High Wycombe and Gravesend are commuter hotspots. All these towns are easily commutable, often within 30 minutes. Upcoming locations include Bedford and Luton.

However, it is not only affordability and ease of commute that is important to migrating Londoners.

Other factors in making the move

Another major factor that prompts people to move out of London is family. Many people moving are in their mid-40s, with good careers and growing families. They desire good schools, better recreation facilities, and better opportunities for their children. They want decent shopping nearby, and country parks to walk, cycle, and play in.

It used to be that London’s higher-grade technology encouraged people and businesses to set up and stay in the capital. This is no longer the case. Cities like Manchester, Birmingham, Leeds and Bristol are highly attractive to startup companies and larger national and international organisations. They are well connected, both in transportation and digital connectivity.

Indeed, we’re experiencing increasing demand from investors who want to take advantage of locations that offer:

  • Improving infrastructure
  • Better transport options (think High-Speed Rail, Crossrail, and the brain belt expressway)
  • Good local schools
  • A growing local economy

They want to invest in properties that will appeal to professionals and families – the type of people that are leaving London. Property requirements are diverse, but needs include space, light, and good connectivity to London. And many of our investors are very forward-looking. Birmingham, for example, is high on their wish list – it’s a young, modern city, with a fast-growing local economy and, crucially, High-Speed Rail is likely to make Birmingham a commuter city.

So, there you have it. Where developers want to build is where migrating Londoners desire to live. And it’s where our investor clients want to buy. Commuter towns, and cities such as Birmingham, Leeds, and Manchester.

Are you a property developer who would like to join these dots? Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

Which-came-first---land-value-increases-or-property-increases

Which came first – land value increases or property price increases?

Smart property developers are on the property investor merry-go-round

Increases in greenfield and brownfield land prices are putting upward pressure on house prices. Combined with the rising cost of the build, the government’s target for affordable homes looks increasingly difficult to fulfil. Nowhere is this more evident than in London.

As we examine in this article, property developers are spreading out from London. This evolution along with affordability issues in London could extend the current period of disparity between London and regional house price growth – and opportunity for property developers.

The new price dynamic and development strategy

The Brexit vote certainly highlighted London’s residential property affordability issues. Since the end of the Global Financial Crisis and Great Recession, house prices in London have spearheaded national growth. In some regions, house prices are barely above their 2007 levels.

As the London market cooled, London’s property developers started to shift focus, looking for opportunities in regional cities that offer greater value from the ground up. Sadiq Khan’s London Plan now appears flawed. Planning constraints imposed are exacerbating the developer emigration from London.

Developers are now firmly focused on urban land in the commuter towns of today and tomorrow. Birmingham has replaced London as the magnet for residential property development, though for developers the major land target is urban centres, in commutable locations, with the opportunity to build apartment blocks.

The outcome is that land prices are growing fastest in cities and towns where house prices are growing fastest. In London, where house price growth has slowed or reversed, land prices are stagnating or falling. Elsewhere, land prices are rocketing.

Regional land and property prices

Property developers are shifting their sights. Rather than London and its outskirts, developers are seeking opportunities in commuter towns such as Chelmsford and Colchester, Luton and Bedford. We’ve seen investor focus shift similarly, as they look to capitalise on greater affordability and the lifestyle that attracts people from London and into the commuter belt.

Consequently, land prices in the commuter towns have been rising. Over the last year, greenfield land prices have increased by an average of 2.1%, having grown by 0.8% in the first quarter of 2018. However, cities and towns further out from London are now outperforming.

Our investor clients started to shift their focus from London even before the Brexit vote. Cities such as Birmingham (currently the UK’s star performer) were top of the investment list for their potential. The new High-Speed Rail network will transform Birmingham, making it a residential destination for people working in London. When high-speed services begin, Birmingham will be a shorter commute time into the City than Chelmsford is today.

Property prices in locations such as Coventry and Solihull have increased by 8.5% and 7.6% over the last 12 months – around twice the national average.

Land values in Birmingham have followed the increases in its property prices (up 8.6% over the last 12 months). Average urban land value growth across the UK is 6.3% over the last year. But this doesn’t tell the whole story. In some areas in the centre of Birmingham, land prices have doubled from this time last year. Regeneration and demand for high-density properties are driving land prices higher.

London land values follow property prices south

While not every borough in London has seen property prices decline, values have fallen by an average of 2%. In prime central London, residential property prices have come back by 4%.

While Brexit focused investors’ sights on affordability in the capital, Sadiq Khan’s response may not be producing the answers he expected. London’s mayor is requiring developers to include 35% affordable housing on their developments. Simply unachievable in many parts of London.

Looking to outlying boroughs, the land has been in demand – especially from housing associations. But developers and housing associations desire sites of more than 100 properties. Smaller sites don’t offer the economy of scale needed to be profitable. The London Plan preferences smaller sites. There is less competition for these, and Mayor Khan’s target of 24,600 new homes per year is beginning to look increasingly difficult with the planning constraints contained in his London Plan.

Land values in central London have fallen by 2% over the last 12 months, and by almost 12% over the last three years.

Summing up

The current environment is helping to determine property developers’ strategies. The fundamentals that have underpinned property investment in the UK over the long term haven’t changed, despite Brexit. But the focus has shifted, away from London and to the regions.

Increasing build costs may limit how much property developers are prepared to pay for development land. Yet with demand for homes likely to continue to increase in regional cities (especially new commuter towns that benefit from massive investment and regeneration), the land will probably continue to be bought in urban centres – resulting in further upward pressure on residential property prices.

It may not be so much a question of which came first, the chicken (rising property prices) or the egg (rising land prices), but rather a question of are you on the property investor merry-go-round, and developing sites where investors want to buy?

So, uncertainty over the future of the policy is likely to be reflected in English greenfield land values in the coming quarters, coupled with house builders factoring into their margins the unclear economic picture ahead.

The report also says that the fundamentals that underpinned demand in the fourth quarter of 2017 remain unchanged. However, high build costs are increasingly limiting how much developers are willing to pay for the land.

Our investor clients are actively seeking property investment opportunities in the UK’s major cities and commuter towns. Let us help you ignite your early-stage sales with our off-market, off-plan sales expertise and our global investor reach. Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood

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