The challenges developers are facing are numerous – from planning hurdles, lack of land, soaring construction costs, seemingly never-ending rises in interest rates and inflation, plus pressure to build Green. So, how can developers overcome these obstacles in order to remain in the game?
The Federation of Master Builders housebuilder’s survey 2021 reported that 63% of its respondents stated that the biggest barrier to building new homes was lack of available sites. However, earlier this year the government had set aside £1.8 billion for brownfield land development, new affordable housing projects and community regeneration. This shows some support for the sector but many would argue it is not enough to encourage the levels of housebuilding required in the UK.
Only 19% of housebuilders felt high levels of certainty over the outcome of planning applications, the recent FMB survey showed. However, years of industry experience suggests that residential developers aren’t easily deterred and are resilient to hurdles. Despite the disappointment of the recently lauded Planning White Paper effectively being dead in the water, SME developers expect planning applications to be rejected or to be met with significant amends. Although the planning process can be fraught and frankly unhelpful in helping to reach government manifesto targets of building 300,000 new homes each year, housebuilders have no choice but to accept this as part of the overall process of residential development in the UK.
It is difficult to predict whether the continuing hike in interest rates will blight the UK economic landscape long term. The uncertainty means SME developers will inevitably approach future schemes with more caution in terms of pricing and size of developments, although past experience has shown that well priced, high spec homes that satisfy local requirements remain in demand, despite rate rises.
According to the ONS, cost of materials has been pushed up as much as 21% in 2021, with global supply chain issues further exacerbated due to the Russian invasion of Ukraine. However, because SME residential developers generally build to a high spec, have done their market research thoroughly and don’t build in large quantities, some of the cost increase can be reflected in the asking prices. This means their product remains attractive and still provides good value. Many of our developers continue to see their units being snapped up, often before construction has completed.
With two fifths of UK carbon emissions coming from housing stock, the government is continuing to put pressure on the residential development sector to meet sustainability standards. Research by law firm Shakespeare Martineau found that 77% of buyers are likely to consider purchasing a green home for their next property. However, reducing barriers, in order to build more green homes is needed, ranging from simplification of the planning system as well as improved and preferential finance rates for SMEs building green homes.
Increasingly SME developers are adapting in a bid to counter the hurdles that present themselves. Use of Proptech and employing software such as Aprao (aprao.com) to streamline the entire construction cycle means that small developers can plan, monitor and execute developments efficiently. Using bespoke software to manage projects saves time and cuts costs and there are packages available in the market to help housebuilders navigate headache issues such as quality and health & safety requirements. Forward thinking construction technology such as BIM (building information technology), 3D modelling and modular are just some of the ways that SME residential developers are able to become nimbler and react faster to economic challenges and meet market demand. It’s exciting times for innovation which SME residential developers are beginning to embrace to ensure that they can stay in the game.