The challenges property developers are facing and how they are overcoming them
Research from Shawbrook identifies the major challenges faced by property developers, and reveals 99% of developers have made changes to their business strategy in the past year to overcome these.
At a glance
Property developers have faced continued uncertainty, stemming from rising costs, high interest rates and a challenging economic environment. However, despite tough conditions, nearly every developer has managed to change tact and diversify their strategy.
Half (49%) of property developers are turning towards using different materials to reduce costs, and the same number are exploring new areas and regions to build in. 48% are also planning to build new property types in order to diversify their developments, and 38% are planning to invest in new technology.
When asked why they are changing their strategies, nearly a third (31%) of property developers are doing so to meet current demand in the market. 29% are making changes to expand their business, and the same number are altering their strategies to improve profit margin. Thinking about key challenges over the next 12 months, property developers cited rising costs as their biggest concern (26%); followed closely by rising mortgage rates (25%) and rising material costs.
The fact that a strong proportion of property developers are planning to expand their businesses should provide cause for optimism
Why are property developers changing their strategies?
Of those who have changed their strategies, the following have done this:
|
31% |
To meet demand within the market |
|
29% |
To expand the business |
|
29% |
To improve profit margins |
|
28% |
To become more sustainable |
|
28% |
To improve EPC ratings |
|
28% |
To make the most of government incentives |
|
28% |
To reduce overheads |
|
27% |
To diversify portfolios |
|
26% |
To improve efficiency |
|
24% |
To meet government regulations |
Key challenges over the past 12 months:
|
26% |
Rising costs of labour |
|
25% |
Rising mortgage rates |
|
25% |
Difficulty accessing funding/investment |
|
25% |
Falling house prices |
|
25% |
Rising cost of materials |
|
25% |
New regulations |
|
24% |
Cost of living impact on buyers |
|
23% |
Obtaining planning permission |
|
23% |
ESG/sustainability commitments |
|
22% |
Lack of government support for UK housebuilding |
Terry Woodley, MD of Development Finance at Shawbrook, commented:
“Developers have faced an array of challenges and continued market turbulence over the past year. However, our research shows that developers have remained agile and resilient, and have implemented changes to navigate their businesses through recent uncertainty.
“The fact that a strong proportion of developers are planning to expand their businesses should provide cause for optimism, and the adaptability already displayed will be key to diversifying income streams and ensuring strategies are robust for the year ahead.
“Given that developers listed access to funding as a concern, now could be an opportune time to partner with a specialist lender who can offer expertise, support and flexibility throughout a development process.”
Methodology
Research was conducted by Censuswide between 16.04 - 03.05 2024, surveying 567 property developers aged 18+ across England, Wales and Scotland.
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