In the UK, housing is in short supply. The government’s White Paper “Fixing our Broken Housing Market”, published in 2017, states that an estimated 240-300,000 new homes are needed per year in England “for the foreseeable future”. With such a pressing need for new homes, is now a good time to become a property developer?
What are the options?
There are many different approaches to making a living from property development. You can:
- buy a house, renovate and extend it, then sell on for a profit;
- buy a house, renovate and extend it, then rent it out;
- buy a plot of land, obtain planning permission for a development, then sell the plot with the planning permission to increase its value;
- buy a piece of land, get planning permission for the development, build it, then sell or let it – either in units or as a whole.
In this article, we are going to focus on options 3 and 4.
How do I get into new build property development?
It’s always best to start small. You can gain the experience you need to progress and you can get a feel for whether property development is something that’s right for you. Property development can be very time-consuming and expensive if you are not given the correct advice at the outset.
While it’s best to have some initial understanding of the subject, the main thing you need to start is adequate finance – either your own funds or through a mortgage.
With that in place, a starting point would be to acquire a piece of land with planning permission and either try to improve the planning permission to increase the value of the plot or build something small on it to sell for a profit.
Where do I start?
Research is the key here, as there are many pieces of land available on the market, either with or without planning permission. Make sure the site you choose will allow you to achieve your objectives, whether that’s an increase in value with a new planning consent or a building you can sell on.
We advise many clients looking for new sites to examine:
- whether the site has outline or detailed planning permission;
- the likelihood of obtaining an improved planning permission;
- the potential size of any development that can be achieved.
In the first instance, you may want to keep costs down. We can produce a feasibility plan (including site plan, street scene and floor area analysis) based on Ordnance survey information which could then establish the kind of development you could fit on the piece of land.
A feasibility plan would enable us to have initial discussions with the local planning authority to establish the likely acceptability of your proposals. Positive advice from them will give you the confidence to move forward with the project.
What are the main constraints to property development?
If you see land advertised for sale with planning permission for two dwellings, then that is an excellent starting point. But you should check whether all constraints were examined while gaining the planning approval.
The main constraints are:
- Topography – The level of the land could dictate build costs, what you can physically fit on the site, and also raise questions about site drainage.
- Highways – Access to the development is the key to all successful schemes. Without adequate access including appropriate visibility, widths, gradients etc. there will be no development.
- Trees – You will need to check if the site is subject to any Tree Preservation Orders or if it is within a Conservation Area. Any development will need to work around the Root Protection Areas of the trees involved if they are to be retained.
- Flood risk – You must establish if the site is within flood zone 1, 2 or 3. Flood zone 1 is acceptable for residential development whereas flood zones 2 & 3 may not be.
- Protected species – The presence of bats, badgers, birds and newts, for example, can have severe implications on development and will affect timescales concerning when you can start a build and, if present, what mitigation is required.
- Drainage – It is essential to establish whether any public sewers cross the site and if there are any in the road network nearby.
- Heritage impact – If the site is located close to Listed Buildings or within a Conservation Area, this will affect the design of your building.
- Neighbouring properties – One of the most important points is that your proposals do not have any detrimental impact on any adjacent properties. This will not be acceptable from a planning policy perspective.
How do I obtain planning permission?
With the right help, applying for planning permission is quite straightforward, and we can help you through the entire process. For simplicity, we are just going to discuss two separate options: obtaining outline planning permission and full planning permission.
Outline planning permission
An outline application is the more cost-effective way of finding out if a site has development potential.
There are a range of options with an outline application, ranging from just putting a red line around a piece of land, all the way to producing site plans, street scenes, fixing layout, access, scale, appearance and landscaping, to give a much more complete approval.
The more detailed your outline approval, the higher your chance of achieving better value for the land if you resell it. An agent will be able to put fixed figures on the site, rather than just guessing what value could potentially be achieved.
Full planning permission
Applying for full planning permission is more of a risk as there are more upfront costs. It would be an appropriate way to go if you have received very positive pre-application advice from the planning authority, or if you are working on a site that already has a planning approval and you want to revise the design scheme.
The planning process distinguishes between two types of development: minor and major.
Minor developments are typically classed as extensions or developments below ten units or 1000 sq. m. Major developments are anything over ten units or over 1000 sq. m. The difference in planning permission timescales are that a minor application will take eight weeks, while a major application will take 13 weeks.
Each application will be judged against local and national planning policies.
How big should I build?
It is important to understand the local market so getting agents’ advice early is advised.
Bear in mind that bigger does not necessarily mean more profit. Each area has a ceiling value to what you can achieve from a building. If a house of 2000 sq. ft. is worth £500,000 it doesn’t mean that one nearby at 3000 sq. ft. would be worth £750,000. There is sometimes no benefit in increasing the size of a dwelling, e.g. by adding more bedrooms, because you would have added build costs which you may not be able to recoup from the final sale price. We can look at this with you, if required, to consider future property values.
How to choose a designer to work with
We have worked with many property developers over the years. We asked some for their advice on how they go about choosing a designer to partner with. Here’s what they said.
Look for somebody who’s experienced. Someone with a practice of a sufficient size to be able to turn work around fairly quickly. Sometimes, if you use a one-man-band, whilst they could be a fantastic designer, if you’ve got to wait for ages then that’s no good to you.
Find someone with a professional and organised approach, someone who is systematic about the way they approach a job. Finally, look for somebody who’s got a proven track record.
Roger Hemsley
RJH Building Construction Ltd, Coalville
As a builder and developer the costs have got to be right. For us to make a profit it doesn’t start in the foundations, or getting the concrete at the right price. It’s getting the architectural design at the right price as well.
When choosing a designer you need someone sympathetic to clients’ needs, as much as they’re sympathetic to builders’ or developers’ needs. Someone who understands that developments need to be designed economically and yet still appeal to the public
David Allen
Wigston, Leicester
The planning system today means you have to go through every type of hoop. You need to find a designer who can make the right specialist contacts available to you. If you can find someone who has the right people at hand it takes all the aggro away from you.
We can help
If you are looking to take your first steps in new build property development, and need an experienced design team who can take the aggro away, why not give us a call on 01530 560939 or use the contact form below.
Photo © Ron Rusitar 2017 and made available under an Attribution 2.0 Generic (CC BY 2.0) license.
