Developers need to pay attention to detail in today’s harsh market
25 March 2008
Roger Tidyman, managing director of BEL Global Trust Bank explains that developers need to pay attention to detail to make money in a slowing market.
The current housing market is a challenging environment for property developers. Gone are the days when house price inflation would solve most of a developer’s problems.
National house prices fell for the second month running in December 2007, a sure sign that the market is cooling off. The 0.5% fall followed a 0.8% drop in November and brings the annual rate of price growth down to 4.8%, from a peak of 11.1% in June and 10.5% in December 2006. Forecasts for prices in 2008 vary from 2% up to 10% down.
Now, only the developers who really understand their market, deliver what buyers want and add real value to their projects will remain profitable in this harsh market.
At the moment many areas have an over supply of two bedroom apartments and a woefully short supply of affordable two and three bedroom family homes. Developers would be well advised to consider building more family homes to meet with the current demands.
As always location is all important, especially in a cooling market. It is crucial that developers build the right product in the right place and build quickly so they do not miss opportunities. They need to find areas where there is a low supply but high demand, coupled with thriving local economy and strong employment opportunities and good commuter links. Also consider less obvious areas where employment opportunities are on the rise.
At BEL Global Trust Bank, we specialise in flexible finance solutions for developers and understand the marketplace. We can advise on the best locations that are ripe for investment and the types of developments that will yield the highest returns.
Environmental issues are top of the political agenda with local authorities and individuals looking for ways to maximise their energy efficiency and reduce their carbon footprints. With this in mind, developers need to embrace sustainability and incorporate it into their designs from the construction process, through to the materials used in the development. Sustainable designs sell developments.
It is also essential that developers keep a close eye on building costs, including the project finance and obtain the best deals to increase their profit margins.
At BEL Global Trust Bank we deliver intelligent financial solutions quickly, sometimes within 24 hours, with favourable rates throughout the development process. For established property developers with proven track records, we can provide debt and equity loans at up to 100% of cost to develop land and can release equity from other completed projects to finance the next development.