Off-Plan Stock and Land Transaction Levels boost the UK Development Market

One area of the property market that really feels the impact of a recession is the development of new property, both already completed and off-plan. In boom times, in a market where there is generally a shortage this it can be a key driver for investment profitability. However when an economic crisis hits, it can be the first area of the market to feel the impact and takes longer to recover. After 18 months of uncertainty and investors taking a cautionary stance, there is now a new a positive outlook for off-plan development and a noted increase in land transaction levels across the UK and abroad, including the London property market.

Although in the short-term, there may be some temporary unrest while the coalition government takes shape and new policies come into effect, in the long term, the outlook is positive. With the economic backdrop of a weak pound and low interest rates predicted to continue, it attracts both international and domestic buyers into the newly developed part of the UK housing market. Generally speaking, the domestic buyers are owner-occupiers and the investment is coming from abroad. It is also the overseas buyer, typically from the Far East, the Middle East and continental Europe that are driving the value in the top end of the development market. The value levels in some cases have returned to peak levels last seen in 2006 and 2007. This in turn creates confidence in the market place.

Although the overall pace of this sector’s recovery is slow, there are small signs of demand for the stock of property and houses for sale which has already been completed and pricing levels remain stable. The level of completed stock is low and is expected to continue into the early part of next year.

This is balanced by the off-plan market which is moving at pace especially in areas outside of the capital. Here we see increasing volumes of good quality off-plan housing scheme stock being sold well ahead of completion dates. One factor that also underpins this increase is the level of applicants; hence the pool for this type of stock has remained consistent.

Another area that is up in comparison with the same period last year is the level of land transactions. The demand for both consented and un-consented development opportunities is on the increase, demonstrating that investors are once again taking more calculated risks. Whether the investor is a specialist developer or in fact a large house builder, they remain determined to use the situation to their advantage. Essentially they can achieve extremely good value on their construction costs due to the competition in that industry.

In summary, there is movement in key areas of the development market; demand for off-plan stock and the increase in land transaction levels. This in turn boosts the whole sector and with the economic backdrop, it will continue to attract both home based and international buyers and investors alike.