Mid-sized residential property developers, who collectively build new homes worth around £1bn a year, are optimistic about their businesses growing over the next three years, a new study has found.
The study, commissioned by the property finance division of investment manager Downing LLP, reveals that 78% of residential property developers expect their businesses to grow over the next three years – with 12% anticipating strong growth.
However, the research identified that property developers have several concerns about the risks they face. Over half (56%) are ‘very concerned’ about the cost of raw materials rising, followed by 50% who said this about securing the necessary insurance.
Almost half (46%) said they are very concerned about the length of time it takes to secure approval from councils to build properties.
Half of the medium-sized property developers (52%) said the length of time it took for local authorities to provide feedback or approval on development projects increased during the Covid-19 crisis.
Since the end of the worst of the pandemic, 64% of developers say the process has improved, although 26% say there has been no improvement.
| Risk facing property developers | Percentage of mid-sized property developers who are very concerned about this | Percentage of mid-sized property developers who are quite concerned about this | Percentage of mid-sized property developers who are not concerned | Don’t know |
| The cost of raw materials rising | 56% | 40% | 2% | 1% |
| Shortage of labour | 34% | 40% | 22% | 4% |
| Access to funding | 44% | 38% | 12% | 6% |
| Red tape/length of time it takes to secure approval from councils for projects | 46% | 34% | 12% | 8% |
| Securing the necessary insurance | 50% | 40% | 8% | 2% |
| Fears of residential property price correction | 36% | 50% | 14% | 0% |
Parik Chandra, partner and head of specialistlLending at Downing LLP, said: “Despite concerns about the economy and rising inflation, the need for a huge increase in the UK’s pool of residential property and the firm commitment from the government to achieve this means developers remain optimistic about growing their businesses.
“However, they face several risks from the rising cost in raw materials to access to funding.”
