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 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


Five ways we differ from other property developer sales channels

A sales strategy targeted at active property investors

Selling your property development before a brick has been laid is no easy task. Selling it when it is no more than a plot of land, a wedge of artist impressions, and perhaps a scale model is even more difficult. And selling a development off-market is another step further. This is what our sales team specialises in: off-plan, off-market sales to investors that gives your property development real step-change impetus at the beginning of its life.

There are five things we do that differentiate us from other sales channels. These strategies help us reach out to investors from around the world, giving you a wider and deeper base of potential buyers.

1.    We provide exceptional customer service

At such an early stage of development, we understand that our job is to provide an excellent service to investors. What we’re really selling is the promise that at some time in the future they will be the owner of a fantastic property that will be in demand from tenants.

We keep in touch with all our investor clients. We provide email newsletters, general research, and enormous amounts of educational resources. We find out what their objectives are, their timescales, and the extent of capital they wish to commit. And we build a very personal relationship.

2.    We sell investment potential, not homes

At this early stage, we concentrate on highlighting investment potential. It’s not a home yet, and nor will it be to our long-term investors. How do we do this?

We promote the developer’s record, of course, but we do much more. We provide investors with comprehensive research that describes the fundamentals that will drive the potential of their investment in the area. We also provide a  detailed projection of potential returns, based upon this extensive research. And we match all this to the investor profile that we have built up during the relationship-building phase.

3.    We never over-promise, but sell reality

We don’t promise what cannot be delivered. We prepare investors for possible delays in delivery, for example. We provide outline schedules and then manage the process of buying for the investor. Our services include strong relationships with the key professionals that the investor will need: mortgage brokers and solicitors, for example. By using well-qualified and recommended partners, investors are given extra confidence.

4.    We reiterate the investment potential of the property

We now concentrate on the rental potential of the property being bought and the potential for capital gains. We consider area demographics and provide evidence of how the property will appeal to the widest audience. We’ll also help the investor decide on the internal specs – the furniture, fixtures and fittings that will solidify tenant appeal and help to maximise rental income.

5.    We monitor and report

Investors want to see progress. Most will not be able to visit the site, so we do this for them. We provide an essential link between you, the investor’s professional network, and the investor. This helps us to manage expectations, while reassuring investors that the development is no longer a scale model, but a full-size reality.

The bottom line is that our investor buyers make excellent buying decisions driven by logical thinking, time after time. Very different to the emotional drivers of selling to homebuyers – and requiring a very different sales strategy.

Our investor clients become long-term holders of property, returning to us to source new property investment opportunities for them as they build and diversify their portfolios – as we help developers sell their early-stage off-plan property off-market, without the need for the developer to pay for largescale and expensive marketing.

Let your property development benefit from the Castlereach advantage. Call us today on 0207 923 5680.

Live with passion

Brett Alegre-Wood


What homes should developers sell in a bouncing property market?

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

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

Residential property purchases bounce back to life

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

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

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

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

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

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

What do buyers want from new build?

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

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

·      First-time buyers

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

·      Urban dwellers

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

·      Upsizers

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

·      Downsizers

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

·      Suburban dwellers

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

And property investors? What do they want?

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

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

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

Live with passion

Brett Alegre-Wood


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

Examining the latest news gives clues for property development sales potential

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

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

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

Social housing – the slow lane?

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

What is the problem?

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

What will the green paper tell us?

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

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

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

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

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

Could the green paper fuel social housing projects?

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

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

Build-to-rent – the middle lane?

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

Finally, a blueprint for build-to-rent

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

Momentum building

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

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

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

Does build-to-rent need to evolve further?

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

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

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

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

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

Buy-to-let landlords are buyers, not sellers

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

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

Tackling the effect of tax changes

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

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

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

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

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

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

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

Live with passion

Brett Alegre-Wood


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

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

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

For government

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

For institutional investors

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

For tenants

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

For developers

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

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

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

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

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

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

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

Live with passion

Brett Alegre-Wood


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

Soundproof your development and sales-proof your marketing

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

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

What is the Agent of Change Bill?

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

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

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

What does the new law mean?

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

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

What might developers need to do?

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

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

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

Live with passion

Brett Alegre-Wood


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

The construction industry defies Brexit bashers on all levels

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

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

New home completions soar in the UK

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

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

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

New build starts are rising, too

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

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

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


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

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

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

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

The construction industry is employing tens of thousands of new recruits

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

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

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

Wages are rising in construction

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

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

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

Live with passion

Brett Alegre-Wood


Why all UK property developers must watch Manchester

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

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

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

What is the argument?

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

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

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

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

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

What might transparency mean?

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

Why are no affordable homes being built in Manchester?

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

What are the next steps?

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

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

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

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

Live with passion

Brett Alegre-Wood


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

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

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

Hammond confirms 300,000 homes-per-year target

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

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

More money for housing in London

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

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

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

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

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

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

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

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

The land banking review – initial findings

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

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

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

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

Initial responses to Letwin’s letter have been mixed.

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

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

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

Live with passion

Brett Alegre-Wood