2022 saw three prime ministers, three budgets, stamp duty go down, mortgage rates up. Against this, property market challenges include competition for land, prohibitive red tape behind planning policy, and rising building costs. This all now set against a stagnating housing market. Here we review some of these pinch points in the development industry and highlight opportunities for 2023.

Opportunities for development

In the face of the levelling off in house prices, Savills confirms that “growing concern about the future demand and pricing for new homes has led [developers] to become more selective and considered in their land buying, focusing on their priority areas.” With competition for land potentially easing off in some locations, there is no better time to look at sourcing sites for future development. That said, changing market trends means it is all the more important to focus on finding the best and most relevant opportunities.

Growing build to rent market

As house prices are forecast to stall - or even drop - some buyers will hold off from moving house in 2023.  Meantime, renting is becoming increasingly popular, including in the regional markets. As reports show that the build to let market is forecast to grow five-fold in the next decade, this is an ideal way for developers to diversify their portfolios in the short to medium term.

‍Smaller development projects

According to Savills, market uncertainties have meant that major house builders are focusing on buying large sites (of over 100 units) within their core markets. There is less interest, therefore, in smaller sites in “out of core patch” locations. This will present new opportunities for SMEs building in competitive local authority areas, as well as for those seeking smaller projects to feed their pipelines.

Barriers to property development

Challenges still include a slow planning process, and onerous legislation. SearchLand’s recently published planning data for 2022 shows, however, that planning permission rates vary across the UK. These differ from 87.9% in the North East, to less than 60% in the South East - suggesting that regional and local factors are also a consideration.

Competition for land

The contest for rural sites now includes from land-greedy renewables such as solar energy. Land is also being used for environmental projects such as rewilding and nutrient mitigation. From November, this will also include the need for 10% biodiversity net gain in each development. With more also being sold privately, sourcing off market will continue to be the best way to get in ahead of the competition. 

Nutrient neutrality schemes

Currently 74 LPAS have planning approvals constrained by nutrient neutrality obligations. From December the Government plan is to actively target more sites for national nutrient off-setting projects. Schemes, such as that recently launched in Tees, will be open to developers looking for nutrient mitigation for their planning applications. Going forward, as part of the Levelling Up Bill, waste water companies will be legally required to update their treatment plants, to remove pollution from the affected watercourses.

‍Future demand for homes

Rising mortgages mean that the recent boom in the housing market has, as aforementioned, come to an end.  This is set against increasing building costs, in part due to the introduction of part L of the Building Regulations, and from 2025, the Future Homes Standard.

That said, budget stretched buyers are now looking for ways of reducing heating bills and future proofing their costs of living. Zoopla confirms that more home movers are looking for smaller, more energy efficient properties. They will also be more likely to want to reduce carbon emissions in their homes. These factors should support the new homes market and help developers to offset the costs of recent and future legislation.

‍How SearchLand can help in 2023

For builders and developers, finding and acquiring the most viable and profitable sites, in the best locations, will be key to making the most of any opportunities.

SearchLand’s comprehensive, extensive coverage of land and property planning data across England and Wales means that stakeholders can source more and better land off market to meet their specific needs. If you haven’t already done so, why not get in touch to find out how we can help you to make the most of the development market in 2023.

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