3 areas where innovation will help UK property developers build faster

Support and creativity needed to hit homebuilding targets in the UK

If the UK is to have any chance of building the government’s target of 300,000 new homes each year by the mid-2020s, it’s becoming clear that some big changes will be needed in the property development sector. This is going to require a more innovative approach in three key areas: planning, finance and construction. If other countries can put a rocket under new home numbers, shouldn’t we be able to do the same?

Property development planning

The planning regime in the United Kingdom is mostly working to rules developed two or more decades ago. While this is beginning to change – finally, government and local authorities have realised that the process needs to be streamlined and sped up – it’s still got some way to go to match planning processes in other countries.

Finding sites and getting consents is imperative to building hundreds of thousands of new homes each year. The slower and more laborious this process, the fewer homes are likely to be built.

As an example of what can be achieved, in Singapore, there is a much simpler planning process. From the start, developers there are provided with master plans that show what can and cannot be built. This forward-thinking approach means that developers can move much faster, safe in the knowledge of what they can build and the margins they could make.

Property development financing

Increasingly, we’re seeing innovative financing options being used to fund developments abroad. Crowdfunding and peer-to-peer lending, for example.

In the United States, where development debt is more expensive, property developers use debt in tranches, settling as milestones are reached. They do this by repaying the current debt tranche with new, cheaper financing options.

Options that developers are beginning to use more commonly in the UK include mezzanine debt and equity, as well as providing more opportunity for off-plan investors to buy property at earlier stages. But the regulatory environment does not help developers access more innovative lines of financing easily and certainly does not help smaller developers.

Property development construction

While city centre sites are developed for multiple families, suburban and out-of-town developments remain focused on providing single-family homes. These homes take months to build.

Property development in other countries is managing to keep pace with demand by encouraging multi-family properties, and then building for co-living** (with common areas such as gardens, gyms, laundry rooms, etc.). In addition, single-family homes and multi-family apartment blocks are increasingly built using modular housing* strategies.

*Read our article “Could modular housing be the future of property development in the UK?”

** Read our article “Could co-living be the solution to UK homes affordability issues?”

In Sweden, eight out of 10 new single-family homes are built using modular, prefabricated housing techniques. In the United States, 80% of new multi-family developments (more than 20 units) receive planning permission within three months, with around 50% completed within 12 months (United States Census Bureau, New Residential Construction).

Multi-family, co-living properties enable developers to build for different demographics, different needs, and different budgets – providing housing for more people faster.

In summary

We seem to struggle with redefining the three key areas needed to speed up the delivery of new homes in the UK. Maybe this is the problem – we’re trying to redefine and remodel the whole system, almost ‘from scratch’. Perhaps the government is making it too difficult. We don’t need to rewrite all the rules on a blank piece of paper. We just need to look at how other countries are managing to meet ambitious homebuilding targets, and then pinch a few ideas that work.

There is much that the UK property development sector could learn from looking abroad. But it relies on the lead from the government. Developers are already seeking new and innovative ways to build properties and raise finance to do so. The government must provide the structure that makes this innovation practical.

The government has started with making changes to planning permission law. This should make it easier to build on inner-city sites, and build up, too. But, small- and medium-sized developers will require support – including with access to cheaper financing.

Get your new development off to a flying start. Contact us at Castlereach by calling 0207 923 5680. Discover how our access to a global database of property investors keen to buy UK property could help you.

Live with passion

Brett Alegre-Wood

Do property developers and the construction sector need an overhaul?

Has the House of Lords hit the nail on the head or hammered its own thumb?

Hot on the heels of the Letwin Review finding that property developers are not guilty of land banking, a House of Lords Science and Technology Committee report has suggested that housebuilders need to embrace innovation to meet new home targets. In particular, the report urges greater use of off-site manufacturing processes.

House of Lords Committee criticises current construction practices

The report first states that it has found the housebuilding and construction sector as incapable of meeting the government’s targets of building 300,000 new homes per year by 2020, due to the way in which it currently operates:

• It says that traditional construction methods do not offer the capacity to build enough homes
• The report also casts doubt on the ability of construction companies to create the infrastructure required to support the targeted level of housebuilding
• Additionally, it suggests that the industry must work towards more environmentally friendly solutions which ‘reduce labour demands’
• It also cites poor productivity within the sector as a major disadvantage

Pretty damning stuff.

The report agrees with Letwin about labour

While the Letwin Review and this report tackle two different areas of concern, they do share at least one common conclusion: the construction sector is severely short of qualified labour resources. The two parties have different ideas about the solution needed.

Letwin says hire more brickies

Letwin puts forward a solution that would see 15,000 more bricklayers recruited and trained in a fast-track manner. This, his review says, should provide enough manpower to increase the number of homes built, providing it is combined with faster planning permissions and easier access to land.

The House of Lords says use OSM

The House of Lords Science and Technology Committee comes to a different conclusion. Perhaps unsurprisingly, given its focus, the committee concludes that the sector should invest more in technology and innovation. Specifically, it says that housebuilders should give greater emphasis to the off-site manufacture of homes. It believes this is the only way to ramp up completions to the 300,000-per-year target.

OSM – could it be the solution?

The report concludes that OSM will increase productivity, reduce labour demands, and be more environmentally friendly. It notes that take-up of OSM is patchy and limited at present, placing the blame firmly at the doors of developers, saying that the sector generally works with outdated and unsustainable business practices.

It suggests that there should be more collaboration between clients, designers and contractors, instead of the fragmented and distrustful environment from which the sector currently suffers!

But there is still a problem with OSM

It all sounds so plausible, but there is one problem. And it’s a problem that the report acknowledges. The UK labour market is lacking the skillsets required to step up with OSM. People would have to be employed and then trained in areas such as digital, procurement, and site implementation.

So, the report says that OSM would tackle the labour shortage in the construction sector, and then goes on to state that there is a labour shortage in the entire labour market to enable OSM to happen!

Encourage young people to train for OSM

The report says that:

“The Government must, therefore, ensure that young people entering the workplace are equipped with the digital skills needed for modern methods of construction, including off-site manufacture.”

The chairman of the committee, Lord Patel, said, “There are clear and tangible benefits from the off-site manufacture for construction which make a compelling case for its widespread use. We heard evidence that OSM could increase productivity in the sector by up to 70%.”

He added, “The construction sector’s business models are no longer appropriate and are not supporting the UK’s urgent need for new homes and infrastructure. The construction sector needs to build more trust and create partnerships so that companies can work together to improve the uptake of off-site manufacture, and the Construction Leadership Council should provide the necessary leadership.”

Are Letwin and the Lords missing the point?

We believe that whichever way you cut it, property developers are under serious strain. And whether you build using OSM or traditional methods, you can only build as fast as your sales allow you to – a basic rule of business that neither Letwin nor the Lords appear to fully grasp.

If you want to build more and faster, you must sell more and faster. Contact us at Castlereach by calling 0207 923 5680. Discover how our access to a global database of property investors keen to buy UK property could help you achieve this.

Live with passion

Brett Alegre-Wood

Letwin finds property developers are innocent of land banking

Good business practice and poor government policy could be behind the housing crisis

The Letwin Review was published with no fanfare, no ballyhoo, and little media attention. This may be because it concluded what those in the housebuilding industry said all along: property developers are not guilty of land banking. All that money spent, and all the time it took… all to conclude what we already knew!

Land banking – a figment of imagination

Sir Oliver Letwin has concluded that the government is being prevented from meeting its target of building 300,000 new homes every year within a few years, but, contrary to the beliefs of many, it is not land banking that is to blame.

In fact, for want of a better phrase, Letwin found the concept to be no more than a figment of the imagination. Still, I guess that politicians and ‘experts’ must have someone to blame for the housing crisis – and usually that someone turns out to be the easy target of ‘money-grabbing property developers’ or ‘pickpocketing landlords’. Letwin has found the buck doesn’t stop with property developers.

Letwin says land banking is implausible

Letwin noted in the review that:

“Major house builders need to maintain a sustainable business and seek to do this by ensuring that they, rather than their competitors, hold as much of the land on which they will later wish to build as is compatible with their capital constraints. This may well enable them to minimise market entry and thereby enable them to maintain market share while building out at a stately pace; but it does not, in itself, drive slow build out rates.

“Indeed, if anything, one would expect faster rates of build out to require builders to hold larger supplies of land – since we have been told by market analysts that the stock market valuations of house builders depend not only on the current annual profits of those builders but also on the degree to which those profits are made sustainable by the holding of supplies of land that can be developed in coming years.”

Here is the crux of the matter:

If property developers buy land and sit on it, they won’t make any profit. They’ll go bust. And to buy land in the first place, they must make a profit. So, it is imperative that developers build. Fancy that… a business model that requires you to produce a product and sell it, rather than simply sit on the raw materials.

In other words, what property developers have been saying for years.

Property developers are not entirely blameless, though

Letwin has, however, pointed the finger of blame partially at property developers. Not for land banking, but for controlling the rate at which they build. In other words, Letwin feels that property developers could build faster, but choose not to. The reason? To restrict the numbers of new properties coming to the market, so that a flood of new builds doesn’t drive market prices down.

Um, excuse me – this, again, sounds like good business sense. Can you name a single company that would flood its market with product, thus putting pressure on prices and slashing profits? How long would that company last? And when it folded because it was no longer viable to produce the product, how many people would lose their jobs, and how would the economy be affected?

The government also need to shoulder some of the blame

Letwin has also realised that there is a systemic problem restricting the number of new homes built in the UK: we don’t have enough bricklayers. The Letwin Review highlights this as the second major cause of difficulty meeting the government’s new homes targets. Too few bricklayers mean we can’t turn on the building tap and see a stream of new builds coming to the market.

Letwin has concluded that property developers and the government should work together on a ‘five-year flash programme’ of on-the-job training, to increase the number of qualified and competent bricklayers by 15,000 – an increase of around 25% on the current number.

So, good business practice and the wrong type of education is to blame for the housing crisis, according to Letwin. If we analyse this:

The first is helping to keep people employed and produce wealth for homebuyers, property investors, and homeowners (often wealth that is then used to fund retirement). Profitable businesses help to grow an economy, not crash it.

The second can be laid directly at the foot of government. Most notably the ‘education, education, education’ policy of the Blair years. Instead of encouraging young people to take up trades such as bricklaying, electrics and plumbing, it suddenly became the desire of all youngsters to go to university and get qualified in media studies, creative studies, and social studies.

Keep selling property

To grow your profits, buy more land, and employ more people, property developers need to sell property. It’s a conclusion that Letwin has taken around nine months to come to. It’s a basic business principle that we understand. Our mission is to help property developers sell their off-plan property faster.

To connect your new development with waiting investors from around the globe, 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 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 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

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

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?

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?

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?

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