Two elderly mayflies were chatting: “You don’t get Sun now like we used to. When we were lads we used to get proper yellow Sun, not this red Sun – and it was much higher in the sky”*

For us of course: Tomorrow is another day and the Sun will again be golden yellow and high in the sky! But for the mayfly, that day is their universe. It really is all a matter of perspective!

Much could be said the same as the current interest rate environment. Two rate rises have happened in the last three months and the consensus is that the Bank of England will make three or four more increases this year. This marks the most significant and rapid change in interest rate policy in over 10 years.

But even after taking into account these increases, the current interest rate cycle is likely to peak at between 1.5% and  2%. Whilst interest costs are an important part of the development cost stack, the forecasted rates are a far cry from the peaks of prior cycles and the sun will keep rising!

Stuart Parfitt, Managing Director, BLG Development Finance 

*with credits to Terry Pratchett – Reaper Man    

2020 and 2021 have been turbulent, to say the least. With the coronavirus pandemic, Brexit, and COP26 influencing housing policy nothing has been predictable. However, the UK’s housing market has remained remarkably resilient. For both property investors and homeowners, bricks and mortar have still remained appealing for investment.

Although, people’s emotive buying behaviour has changed due to covid. Both estate agents and builders have seen a growing trend for properties as people reassessed their housing needs, especially during the lockdown. Once before city centres, good facilities, shops, and restaurants were a priority. However, research has found individuals are now moving towards more rural and urban areas. It was found that 10% of British people have moved away from a city due to the coronavirus pandemic. Additionally, 24% considered the move with 44% saying the pandemic has made city living less appealing. Research conducted by Zoopla concluded that 22% of individuals were ‘eager’ or ‘very eager’ to move home within the next 18 months as a direct result of the pandemic.

Is There A Fall Within The Property Market On The Horizon?

With the enforcement of working from home, many office workers are now looking for a more suburban lifestyle with greener and space to settle. This has then left many office spaces have been left empty. Additionally, this trend will continue to grow as businesses become more flexible and accustomed to this way of working.

However, due to the end of furlough, rising inflations, the final stamp duty holiday ending, increased tax, and increased living costs, it is predicted that there may be a fall on the horizon. According to the latest HM Land Registry UK House Price Index report, house prices increased by 2.5% between September and August. Reporting there was an annual increase of 11.8% equating to on average £269,945 in September. Across the UK, the North West showed the greatest growth rate of 5.3% with London being the hardest hit throughout the pandemic.

Rightmove’s director of property data, Tim Bannister, stated there will be “A return to a less frenetic property market due to more choice, and forecast slightly higher interest rates, will suit many movers who have held back during the last 18 hectic months.” While Zoopla claims “House price growth is forecast to run at 3% by December 2022, in comparison to a rate of more than 6% now.” Therefore, resulting in 20% fewer property sales. Add this to the short supply of building materials due to Brexit and COVID, will the market change in 2022?

House Prices In 2022

According to Athena Hubble, managing director of property portal Boomin, “Looking ahead, there is likely to be an impact from the end of the Government furlough schemes over time, that could trigger more homes coming to the market, with downsizing and selling off from rental homes as key drivers. Financial impacts are likely to see rental demand continue to grow with rentals now cheaper than buying (outside of larger deposits). However, demand is likely to continue to support price inflation, delivering a lower but consistent rise across the UK in 2022.”

How Can BLG Help?

As a principal lending specialist in property development finance, we are positioned to help you. Providing residential and commercial finance ranging from £1 million to £15 million we have the ideal skill set to lend and advise. Priding ourselves on fast decisions and flexible terms we can aid you through these turbulent times. Contact our financial experts today who will take time to get to know you and your aims.

In 2015 the government set out a target to secure 1 million net additions to the housing stock by the end of government which was expected to be in 2020. In the 2017 “Fixing our broken housing market” whitepaper, a number of initiatives were laid out to secure a change in housing supply. It stated “Since the 1970s, there have been on average 160,000 new homes each year in England. The consensus is that we need from 225,000 to 275,000 or more homes per year to keep up with population growth and start to tackle years of under-supply. This isn’t because there’s no space, or because the country is “full”. Only around 11 percent of land in England has been built on.”

At this time Theresa May had a manifesto that pledged to “meet the 2015 commitment to deliver 1 million homes by the end of 2020 and to deliver half a million more by the end of 2022.” Furthermore, in 2019 Boris Johnson also pledged to “continue our progress towards our target of 300,000 homes a year by the mid-2020s. This will see us build at least a million more homes, of all tenures, over the next Parliament – in the areas that really need them.”.

However, UK housebuilders are falling behind the Government’s targets of 300,000 new homes a year. This is despite completing the highest number of homes since 2007 and 161,022 being registered in 2019, according to the National House-Building Council (NHBC). Chief executive, Polly Neate of housing charity Shelter, stated “Relying on big developers to build affordable homes means the Government is falling well short of their ambitious housebuilding targets. The last time anywhere near 300,000 homes a year were built, councils contributed more than 40 percent of them. So, the only way the Government can get back to the building at this scale again is by building social homes.”

Covid 19 and Brexit’s Impact on Housing Developments

Following previous financial years and from the baseline of 220,600 homes built in 2019-20, it is predicted that the government will take eight years to meet its target. With this target obviously proving to be a challenge; Covid 19 and Brexit have then impacted further and added another dimension to the ambition. According to Ministry of Housing, Communities & Local Government research “The number of dwellings where building work had started on site was 15,930 in April to June 2020. This was a 52 percent decrease when compared to last quarter and this steep fall in activity reflected UK government COVID-19 lockdown measures.”

With the uncertainty and fluctuation of both covid and Brexit, the incentive on developers to build in the short term has declined. Polly Neate continues “The government wasn’t on track to meet its own targets even before the pandemic hit. Now with a potential slump in construction [and a growing skills shortage] as a result of Covid, the chances of getting the homes we need built are looking even slimmer. With over a million households on the social housing waiting list, and many more facing economic turmoil and homelessness, we desperately need to get building. We can’t go back to business as usual with missed targets and pitiful numbers of social homes.”

Planning Changes

Home Builders Federation (HBF) and the Land Promoters and Developers Federation (LPDF), commissioned research exploring the housing crisis. Conducted by Lichfields it found one of the key causes of the housing shortage, is the declining pipeline of planning consents for building plots. It was concluded the country will need to increase delivery by 59,200 homes per annum. Equating to 474 to 1,385 additional implementable planning permissions on medium to large sites. Based on the current base of 243,770 net additional homes that were delivered in 2019/20.

Additionally, they reported the importance of a continuing pipeline “to deliver sufficient homes to satisfy peoples’ needs and demands”. The stated “with generally short pipelines held by housebuilders equivalent to 3.3 years’ output and each ‘outlet’ delivering on average 45 homes [per] year. To bridge the gap to 300,000 net additional homes will require additional sites being granted planning permission. The scale-up needed is equivalent to each District in England granting permission for an extra 4 to 5 medium-sized sites per year. Or alternatively 4 to 5 large sites over a longer period. Therefore, ensuring a variety of different sites is key to scaling up overall output.”

Paul Brocklehurst, LPDF’s chairman, commented said: “Contrary to the message often conveyed by local authority representatives, there is not a major surplus of planning permissions compared to the actual number of homes being built. The imbalance is explained by the length of the development pipeline caused in part by shortages of local government staffing and resources.”

Andrew Whitaker, HBF’s planning director stated “Increasing the pace of build-out will only be achievable with a faster top-up of development pipelines with more sites. Otherwise, the housing supply will simply dry up. If we are to get back to pre-pandemic housing supply levels, which were still well short of the government’s target of 300,000, more land needs to be allocated and major improvements to the planning process will be needed.”

Finance your property development with BLG

As a leading principal lender, specialising in property development finance, we are experts in our field. We offer various loans and agreements and have funded various buildings across the UK. Providing access to our dedicated teams they talk you through your options for both commercial and residential property developers. We pride ourselves on making fast decisions with flexible terms to allow you to move quickly, contact us today on 01483 94 94 94 or email [email protected].

With covid and Brexit, it was projected that the property industry would take a downturn. However, the property investment market has been one industry that has remained active through the past 18 months. A boom has been reported across The UK for both residential and commercial properties. However, it has seen changes within location choice. When choosing a property to invest in location is the top priority to get right if you are wanting for a high yielding future-proofed investment. House prices within the UK have risen the fastest in over 7 years, with an increase of 10.9%.

For many years there has been a significant north, south divide when looking into prospect properties. With the north and midlands being the favoured areas. A recent survey from FJP Investment has found the UK’s top property investment hotspots for the coming year. Although this has largely unchanged there was a slight change towards new areas.

The independent survey was completed by more than 500 property investors who have one to two more properties within the UK. Upon asking introduction questions it found that 44% of investors asked, wanted to expand their portfolio in the coming year. Within this, the location mentioned 40% of the time was London.

Following London for where property investors are considering their next purchase:

• West Midlands 32%
• East of England 26 %
• South West 19 %
• East Midlands 17 %
• Yorkshire and Humberside 16 %
• Scotland 15 %
• South East 15 %
• North West 13 %
• North East 9 %
• Wales 5 %
• Northern Ireland 5 %

Lastly, the survey also found 44% of UK property investors are now considering more rural areas following the pandemic. Jamie Johnson, CEO of FJP Investment, commented: “London has retained its crown as an investment hotspot, despite speculation throughout the pandemic that the city may have lost its appeal as a place to live, work and invest. Yet our research also shows that regions such as the West Midlands and East of England rank high among investors’ wish lists, and we should expect these areas, along with the likes of the North East and North West, to attract a high level of property investment in the coming years.”

However, the best property investment areas all depend on your purpose and goals. Different statistics and data are better for different goals. If you are looking to buy and then resell you would ideally look for locations with capital growth. On the other hand, if your goal is a more build to let investment then perhaps consider areas that are better for rental yield.

Research conducted by Select Property used data such as rental dwellings growth, employment rates, number of start-ups, search volume around each of the locations, and property value. It drilled down into more specific city and town results for which is the best for property investment, concluding that Southampton ranked first place. Other top locations were Manchester and Liverpool all showing steadily growing employment and robust businesses. Lastly, Birmingham with the preparations for the Commonwealth Games 2022 well underway. It is predicted that Birmingham will be the fastest-growing region, with prices rising by 24% by 2025.

Adam Price, chief executive officer of Select Property Group stated “As the UK economy bounces back after the pandemic, investing in areas that have scope to grow in terms of population, employment and GVA will be key for securing the best ROI. Cities with excellent commuter links outside of London, or those with growing digital industries like Manchester will always be attractive to renters, meaning property investors can still find excellent value and opportunities in the right areas.”

How to finance your property development?

If you are looking to grow your development business or looking to renovate your next build-to-let project, you will need property development finance. This can cover a variety of options, loans, and mortgages for a vast array of eligible people.

Here at BLG we are experts in our field and have funded various buildings across the UK. We offer various loans and agreements. Providing access to our dedicated teams they talk you through your options for both commercial and residential property developers.

We pride ourselves on making fast decisions with flexible terms to allow you to move quickly, contact us today.