Residential Development Market

With the continuing uncertainty in the economy the development market is staying fairly resilient. There is no escaping the fact the impending deadline for leaving the EU has continued to impact with both labour and material costs rising, increasing the general challenges in the residential development market and making development opportunities less viable.

House builders continuously monitor market confidence to establish the volume of sales rates and values they should be achieving; However, over recent months, there are concerns both buyer and seller interest is starting to wane and sales rates are slowing, particularly in more challenging market areas. The reasoning behind this is almost certainly the economic and political uncertainty, with many people wanting to see what materialises following the 31st October deadline.

National house price growth for the country dropped to 0.7% in July from 1.4% a month earlier, hitting the slowest growth rate since 2012

Housing Associations continue to play a key part in helping to support the private house building market. Their funding structure and ability to both retain any affordable housing on site as a long term investment and change the tenure from say private for sale to social rented during slow sales periods is enabling them to continue to perform strongly on sites as they are less effected by slow sales rates.

The latest figures from NHBC further support this as we are seeing there has been a decline in the numbers of private sector new homes being built in recent months the affordable and rental sector in the UK continues to rise significantly, although these gains have failed to offset the overall decline.

House prices in the UK are rising at the slowest annual rate for seven years, dragged down particularly by steep declines in London and the south. National house price growth for the country dropped to 0.7% in July from 1.4% a month earlier, hitting the slowest growth rate since 2012, said the Office for National Statistics. Housebuilding is notoriously vulnerable to sentiment and it needs political certainty to thrive. However, it also needs labour, affordable materials and able buyers.

The above is not to be unexpected given the supply of development land to the market has slowed down as landowners await the impact to the economy. We are seeing development sites in good value locations are continuing to attract strong interest and land prices as house builders have to continue to hit their annual targets.

In summary, the continuing rise in both labour and material costs as well as the political uncertainty is creating more caution in the market and as a result purchasers are increasingly carrying out more detailed due diligence prior to completing. There remains a strong demand for land, but in the better locations where sales risk is lower.

James Mohammed

DL +44 (0)113 243 7955