In the UK, we still aren’t building enough homes. The government has estimated that as many as 340,000 new homes need to be built each year in order to address the imbalance in supply and demand and tackle the housing crisis. The rate of construction has increased in recent years, but total housing stock only rose by 222,000 between 2017 and 2018, which is still short of what is required.
This dynamic means that there is continued opportunity for developers and, with demand continuing to exceed supply, the right scheme should always attract potential buyers.
However, according to RICS the average time taken to sell a residential property rose to 19 weeks earlier this year, which is the longest period since these records began and an increase rise of nearly 19% in just two years. So, while the fundamentals of property development remain strong, in the current environment it is important to consider your options. If you’re savvy there are plenty of opportunities to make a good return on developments.
If the only strategy you have for your scheme is to sell the units, then your plan could come unstuck and you might even struggle to refinance if you are high leveraged and suffer a down valuation.
Consider Buy to Let
In this climate, it is always worth considering buy to let when planning your scheme from the outset. Not only will this give you more options once the scheme has been completed, but it could also provide the lender with more comfort that there is a viable route for the scheme, which could help to secure the funding you need.
Speak to a broker
The property market may be uncertain at the moment, but the long-term prospects still look good. If you work with the right broker that has expertise in development finance and buy to let, you will be able to create a plan that gives you more certainty about your choices when the time comes to exit your scheme.
With over 16 years’ experience we have commercial experts who would be happy to discuss any development finance queries. Contact us on 0207 965 7271 or email us today.
Your home or property may be repossessed if you do not keep up the repayments on your mortgage.
The Financial Conduct Authority does not regulate some aspects of commercial mortgages, buy to let mortgages or business finance.
This information does not constitute financial, legal or accounting advice. Investors should seek their own independent advice before proceeding.
Sources
House building
http://researchbriefings.files.parliament.uk/documents/CBP-7671/CBP-7671.pdf
