Property development in London and the South East can be a fantastic and profitable experience. However, there are some location-specific factors and considerations that may impact your ability to secure development finance. From vast disparities in land prices, to costly labour and strict planning requirements, there are some obstacles to navigate. In this article, we’re going to explore 5 key considerations before undertaking a property development project in the South East.
1. Project Viability and Market Demand
Understanding the local market is vital to a successful project and your ability to secure development funding. For example, some locations in the South East are heavily skewed towards families, while others have demographics that lean towards retirees or students. Research the specific area to ensure your development aligns with local needs and can achieve strong rental or sales yields. Being able to demonstrate the potential returns to an investor, by creating the right property for the right buyer, will be crucial to a lender.
2. Financial Strength and Experience
Having clear project costs and contingency planning in place will be important to secure development finance. Have a detailed breakdown of all project costs, including extra for unexpected expenses and delays. In the current market, material and labour costs can be quite volatile and you may have to manage unexpected increases mid-way through the project.
The South East has several areas where planning permission may be restricted, such as The South Downs National Park, Chichester Harbour AONB, the High Weald and Kent Downs National Landscapes, and the Surrey Hills, among others. You need to factor in potential delays in obtaining planning permission and other necessary approvals from local authorities. Approach a local lender with local knowledge, such as Hunter Finance, who will be able to advise you on various elements of your build. Demonstrating a successful track record in property development is always an advantage when it comes to securing finance, but in the absence of this, a robust plan is essential.
3. Higher Construction Costs
We’ve previously covered how the cost of construction in London can differ from the cost of construction in Sussex, but it’s important to consider this in your plans as it will have a significant impact on your overall budget. While materials should be similarly priced across the region, consultants, architects, labour, and the cost of any permits needed will vary. The higher cost of living in places like London and Brighton means that wages, and therefore fees, are often higher. Likewise, if you’re building in a conservation area then you may need to employ architects or builders with specific skills. For example, in conservation areas of Brighton & Hove, buildings are required to have features that match the area such as sash windows or specific rendering. These can be much more expensive than ‘normal’ alternatives and will add costs.
4. Exit Plan
This is not specific to the South East but is vital to securing funding nonetheless. However, what is specific to your location is that your exit strategy demonstrates adequate research and local knowledge of the area, its demographics and the state of the market. If your project is to build and sell a family home in an area that’s popular with families, has good transport links and is near local schools, then this would be considered a good, sensible exit strategy.
Regardless of whether you’re looking for a development loan, bridging loan or even exit finance, this is a vital part of obtaining funding to complete your project.
5. Choosing the Right Development Finance Lender
Choosing the right lender for your property development in the South East is vital to the success of your project. You will have a choice between national lenders such as banks or large development finance companies, and local lenders like Hunter Finance.
Local development finance lenders will have a better understanding of the South East market, and will be able to assist you with parts of your project that national ones won’t. For example, they may have experience with other clients undertaking similar projects and will be able to offer advice around maximising your profit and avoiding pitfalls. They will also know local architects, consultants, planning officials and tradespeople who they trust and can recommend.
Finally, as local lenders are often smaller, you’re likely to get the personal touch and build a valuable business relationship with them. They may be able to adapt more to the complexities of your specific project and offer more bespoke finance packages.
The South East is the perfect place for a property development project, and as long as you factor in some location-specific considerations, there is no reason why you can’t enjoy a smooth, profitable process. If you need property development finance, don’t hesitate to contact us or get an agreement in principle.
