What are housing developments in the UK?

by | Nov 16, 2022

Home $ How to buy a property $ Step by step guide: How To Buy A House $ What are housing developments in the UK?

Introduction

In the UK, there are housing developments that are built with the intention of providing more houses for members of society. But who is able to carry these developments out and what kind of knowledge do you need to have in order to do your own development?

Developments are happening more frequently in the UK to meet the demand for housing in London in particular. For example, there was the starter home fund put in place in 2015 to help meet demand and this has since produced thousands of new homes up and down the UK.

In addition, brownfield land is being converted into new housing not only for buying but also for rent. There has been a clear increase in the number of build-to-rent developments in the UK too. These developments are long-term rents that families and people looking to stay in the area for decades are able to sign on to in order to have the feeling of living in an area without buying in a more secure tenancy.

Housing development sign

What is a housing development?

The definition of a housing development is a residential plot of land where houses have been built at the same time. 

In the current UK economy, there is a need for more private companies to step in and build more housing developments after local authorities stepped away from building more homes in the 21st century. After the population grew significantly in the UK afterwards, house prices followed.

In the 20 years after the start of the 21st century, house prices in London have multiplied by five! This statistic alone is enough to emphasise why more housing developments are needed in the UK to make houses more affordable.

Who constructs housing developments in the UK?

The majority of houses built in the UK are done by private companies. You may have heard of some of these larger companies like Taylor Wimpey, Barratt or Persimmon with the fastest-growing housing development company being Countryside properties.

The companies sell directly to members of the public interested in buying new builds often for their first home. The introduction of the help-to-buy scheme which allows first time buyers to buy a house with just a 5% deposit allows buyers to meet this supply in housing.

Other than private companies, local authorities also invest in housing by borrowing money in line with the government regulation document here called the prudential code. This allows local authorities to build more social housing for those who need them and for individual councils to also make up their own rules around how much they are able to borrow because each borough has different needs.

How do new housing developments affect the value of homes?

In general, the rule is true wherever you go in the UK and the rest of the world the more housing there is, the lower house prices will be. As a result, the addition of new housing development can often drive down house prices.

For example, if you look at where the most expensive properties are in the UK (in the City of London). There is an extreme limit on the amount of housing there is in relation to the high demand due to how desirable it is to live in London. This is due to things like protected buildings not being able to be demolished for new homes and just the lack of space for new development because of planning regulations in the city.

This extreme lack of housing supply drives up the price of a property and hence why absurd property prices can be seen in the city of London like this one where a property was listed for sale for $227 million in Knightsbridge, London.

Therefore, before buying a home, make sure you know what the housing development plans are like in the area as this can greatly affect your properties’ ability to grow in value.

A new housing development plan form an architect

What determines the value of a house in the first place?

Multiple factors go into the final house price of a property but the biggest factor is definitely where the house is located. Location affects demand a lot because depending on where the property is located in relation to jobs, amenities and proximity to transport links all affect the demand for housing in an area and hence what a buyer would pay.

Secondary factors despite the location that make a location more or less desirable include the crime rate in the area, the acres of green space and the population change.

Do new developments lower or increase house prices?

Despite the increase in supply, there are instances where new development in an area can increase the demand in an area too and hence the demand for housing rises.

Sometimes, as time passes the area can get so much more desirable that the demand surpasses the supply so house prices increase anyway. For example, the new addition of funding to an area can make the area attractive to live because of new community facilities like parks or schools etc. Even if there was an increase in the supply of housing alongside this, the monumental housing demand will still drive prices up.

Do new commercial developments impact property value?

Sometimes, as new commercial developments are added to an area, this brings more job opportunities with it. As a result, this will drive up the price of residential properties in the area. Therefore, when purchasing a house look for any commercial developments that could drive buyer and rental demand in the future.

Also, the addition of new commercial development may bring new transport links and other facilities that benefit the residential properties with it. These amenities can include new bus and train stations, new roads and paving and also the addition of community buildings. These could come in the form of youth centres, libraries and health centres.

On the other hand, the addition of commercial developments may actually drive down house prices because it increases congestion in the area, brings new people into the area which has a cultural impact and overall destroys the quality of the residential space.

This effect is particularly notable in areas with those who prefer more secluded homes that don’t have a lot of people walking by, perhaps in quieter streets. This is common for those who have families and want to settle down, perhaps in an older demographic.

10 top tips for completing a housing development

If you are looking to get into housing developments, there are some rules and tips you should follow as a developer to ensure your houses get sold to investors or private buyers and you make a profit on the development. 

A block of build to rent flats after development

Evaluate the housing demand

First of all, it is necessary to assess what kind of need there is for housing in the area. If there are areas of the UK where there are large amounts of brownfield land that can be used but there is still a lack of housing. This would be a good indicator of a housing need that needs to be met.

In addition to looking at the needs visually, manually finding land and conducting site visits, you can assess the local government housing data to see the areas of the UK where there is the most demand. On top of this, State Housing Agencies produce data on where the most homes are being developed and where there is the most demand for housing at the moment.

Take a look at the government website here for figures on the number of permanent dwellings being completed and started in the UK. This is a report produced every year to help local authorities and private investors know where to build.

Consult the local authority

Despite the need to have demand in the area, planning a new housing development may be backward to plans from the local authority. As a result, they may not be likely to approve planning the development if they have other plans.

As a result, networking with the local authority is essential to help you meet their housing needs for the borough or council as a whole. Go to local authority meetings and read any published information about housing from your local area.

Consider the site’s restrictions

As a developer, it is vital you’d do the due diligence on the plot of land you plan on building before approving any works and making a significant financial commitment. There should be checks done by a qualified expert like a land surveyor on the soil condition, environmental restrictions and the zoning conditions of the plot of land too.

When a developer proposes the plans for an area all of this must be relayed to the architect, contractor and to council to give a conclusive plan on how you plan to process the housing development.

It could be the case that through these investigations you realise that there are certain conditions about the land like the discovery of toxic soil or Japanese knotweed that make the development unprofitable and you can call off the development here in search of new land. Saving you time and money.

Finalise the development plans

After you have conducted initial checks on the land, securing the land if you want to go ahead with it and coming up with an initial design is crucial for obtaining planning permission. It could be the case that you have to go back and forth with the council over time to finalise a development plan.

However, take your time with this stage of the process as whatever you decide on cannot change that much after the building plan gets approved. This includes deciding on the action to mitigate costs, making sure the soil conditions are okay and establishing a concept for the design of the development. 

In addition, picking exterior materials for the property to suit the atmosphere of neighbouring developments and deciding on how you will landscape the property with allocation for both residential space and outdoor space like parking must all be thought of.

Secure financing and hire a developer

Once the previous steps are in place it will be easier to come up with a financial plan for the development and this will allow you to secure funding either privately or from a loan. This should include cash flow analysis and how everyone involved in the deal is going to get paid including architects, contractors, lawyers, investors and any other miscellaneous professionals.

Using these funds. you can go ahead with the development and hopefully gain a profit on the build.

        Calculating the finances for housing developments

        What is the difference between small and large developments?

        The detail of a housing development largely depends on how big it is. Therefore, it is important to know the difference between larger and smaller developments as a result.

        Large developments

        Larger companies buying larger plots of land often use their capital to their advantage. They will buy large plots of land after they know that the local area will change. 

        They will then wait for the right time for the development to become cheap and most profitable before going ahead with the development. This planning in advance often prices a lot of smaller developers out of deals.

        In addition, larger developers have the advantage of having access to funding at a lower interest rate if they need it because they will be able to pass more complicated credit checks than those new to developing. As a result, they have a competitive advantage when funding deals.

        Small developments

        The good news is for small developers, a developer can find smaller plots of land that larger developers are likely to overlook. Especially for developers who are doing some of their first deals in the industry who still want to keep the development conservative to reduce risk.

        Land that needs revitalising or oddly shaped plots of land are therefore prime targets for the small-scale developer to get their foot in the door.

        In summary

        To wrap things up, the number of developments in the Uk is slowly growing to meet the demand for housing. As a result, getting informed on how you can do your own housing development will allow you to produce a profit and compete with the larger developers who are currently growing at a quick rate.