21 Aug Securing sites, what’s the challenge?
What is the greatest challenge for developers seeking good quality land? How does this compare across different geographies in the UK?
The greatest challenge for developers is the shortage of the right sites in the right locations. Since the SDLT hike and Brexit, developers – large and small – are avoiding the upper market (resales of £1million, plus) and concentrating upon volume, easy to construct, ‘Help to Buy’ qualified housing and apartments. These also need to be in accessible locations i.e. close to shops, schools, major towns, road and rail networks. This is the same across all areas of UK activity; not just the London market.
One of the key Brexit driven challenges is increased costs which means there is less capital available for land. What has this meant for the market? Is this expected to change?
Land values are totally governed by rational gross development value projections and construction costs which continue to rise alongside profit margins, which have also jumped higher due to market uncertainty. The cost of borrowing money is not the issue, there is almost too much cash available from a variety of the usual High Street sources and specialist lenders, but more and more private investors are entering the market too. We have had many sites that cross our desks which are overpriced, and, in many cases, the existing use values are higher than the consented land values. Some private vendors assume, there will be a vast increase in value if they gain planning approval and, in many instances, this is not the case.
Developers are still keen to move forwards for the right opportunity. Where do you see the greatest demand and what are the steps a borrower can take to secure the best site?
Borrowers who are keen to develop currently should seek out independent or specialist land agencies to assist them in their search. In addition to marketing land formally, we and our Ground broker network are often asked to deal with land sales on a far less open market basis. It is these ‘off-market’ sites that are the ones to target. In these instances, the developers should be prepared to retain the agency concerned as in many cases they will not be remunerated by the landowner.
What is the most frequent concern / pain point which you see developers facing in the current market and how would you go about mitigating or reducing this?
The most frequent problem we see developers facing in the current market is the continuing issue with the lack of land as we don’t have enough of it to satisfy the demands of the housebuilders or the UK population. This issue might be mitigated now we that have a fresh Housing Minister in the form of Esther McVey, hence, we might see more flexibility within the ‘hamstrung’ planning system.