Wales


The Property Development Market – How is 2024 Shaping Up?


With fewer development starts over the past 12 months and less property stock coming to market as a result, the current supply of residential properties is limited. Given the ongoing demand for residential properties across the UK, this shortage of supply has helped to ensure average house prices (while dropping


slightly) have remained


relatively strong. First time buyers with increasing help from the bank of mum and dad, combined with cash buyers now comprise c75% of all residential property purchases in the UK and are therefore vital to the ongoing demand for residential property.


How can the Government and private sector help?


Gareth of Davies, the head property of business


development for Commercial Lending at Hodge, shares his thoughts on the state


development


market, key challenges faced by property developers, and the future of


greener homes and property development.


How are rises in interest rates and weak house prices impacting property development?


It’s no secret there’s a material shortfall in housing across the UK, or that Government plans to achieve the development of 300,000 new homes every year by the mid-2020s are now highly unlikely to be met. This is for several reasons - not least a global pandemic - and like any missed target, solving it is going to require a multitude of actions.


One of the main challenges for property developers is instability. We’ve seen considerable increases in development costs over the past 18 months and combined with


a 5000% increase in


base rate in same period, developers have become cautious about starting new development projects.


On a brighter note, the material reduction in a


stable base rate


inflation during 2023 and move to more


(currently


held at 5.25% since August 2023) will undoubtedly create optimism among developers, although I suspect this will need to continue well in to 2024 to create a material change in development starts.


sustainable


Whatever the challenges facing developers, the simple truth is they’re very unlikely to start a development where they cannot see an acceptable profit at completion. Given the equity invested and the risks along the way, this isn’t an unreasonable position.


While I see the shortage of housing in the UK as an opportunity for the private sector, there are undoubtedly things the Government could do to help incentivise property development. Making more land available for redevelopment and further incentivising the redevelopment of brownfield sites, releasing some less valuable and attractive greenfield sites for development, offering grants or tax breaks for certain developments or


conversions alongside shortening,


simplifying and reducing the cost of the planning process, could all help. If we’re serious about getting SME developers developing again, then collectively the UK Government and devolved nations are going to have to seriously consider how they best incentivise them to do so.


There’s the


also private a sector


responsibility to


play its


from part


too. Commercial finance experts like Hodge, support professional property developers and investors across England, Wales, and Scotland and are working hard to expand the lending options we make available as well as raising awareness of who we are and how we can help.


At Hodge, we’ve committed to this effort by enhancing our development finance offering to provide additional flexibility to support property developers as much as possible. Over the past two years we’ve consistently improved our


criteria to meet the evolving needs of developers as they continue to navigate a turbulent housing market, and we will continue to do so as we move further into 2024.


What are your thoughts on the future of greener homes and sustainable property development?


Despite the government’s recent U-turn on several eco-friendly initiatives, including the introduction of minimum EPC ratings on private rental properties, the focus on energy- efficient homes remains crucial. It not only impacts a property’s value and rental demands, but it works towards the zero-carbon initiative that many consumers and developers are striving towards.


The dramatic levels of inflation, particularly on utilities has shone a light on just how important it is to have a well-insulated home. For developers, building


regulations insulation ensure requirements for


strong both


conversion and new build but there are no such requirements for existing stock. As we’ve seen with commercial property over the past few years, we suspect those properties which are best insulated, most efficient and hold the highest EPC rating are the most likely to hold their value and command the highest levels of rent. This is not only valuable for owner occupiers but also


investor landlords and tenants.


The cost of ignoring this position for a property owner is most likely to impact when the property is either rented or sold, mainly in respect of demand but also value and income.


At Hodge, we aim to support clients in


understanding the value and


importance of well-insulated properties and have invested in companies such as Sero, who believe a green, Net Zero Carbon home should be possible for everyone.


To find out more Hodge can help about support how property


development projects, email DevelopmentFinance@Hodge.co.uk.


38


COMMERCIAL PROPERTY MONTHLY 2024


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82