Tag Archives for " property developers "

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

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

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