Brokers operating in development finance appear to be split over which housing sector shows the best potential for growth over the next three years whilst nearly three quarters (73%) expect their volumes of development finance business to increase over the next 12 months.
The survey carried out by United Trust Bank found that while 23 per cent of brokers thought first time buyer properties offered the best potential for growth 21 per cent of brokers thought family housing offered better prospects. The least favorable sectors amongst brokers included luxury flats, retirement housing and eco-friendly developments.
Brokers were asked ‘Which development sector has most potential for growth over the next three years?’
- 23% – FTB
- 21% – Family housing
- 15% – One off individual homes
- 14% – Social housing
- 8% – Luxury family homes
- 6% – Eco friendly housing
- 5% – Luxury flats
- 4% – Retirement
- 4`% – Other
However, despite the difference of opinion over the most promising sectors for developers nearly three quarters (73%) of brokers expect their development finance business to increase over the next 12 months.
Over 40 per cent of brokers placed between £1m and £5m of development finance business in 2011 and nearly a third (33%) placed £5m or more. 63 per cent of brokers expect to exceed their 2011 performance in 2012.
Noel Meredith, Director at United Trust Bank commenting on the survey’s findings said;
“The split in broker opinion is interesting and it’s easy to see why there’s an assumption that the first time buyer sector offers the best prospects for developers. There’s been a lot of publicity surrounding the need to kick start the FTB market and I suspect brokers believe that if developers can find a winning formula there’s a ready market for them. However, the stumbling block could still be that younger buyers without substantial funds are barred from entering the property market or making the second step up the ladder because of the unrealistic demands from mortgage lenders for high percentage deposits. If 85% to 90% mortgages become more freely available at competitive interest rates then brokers and developers may well see a surge in the FTB sector, but it’s far from guaranteed.
“Developers can find success in most sectors but they need to do their homework and demonstrate a very high level of local knowledge and expertise at matching the right product with the right buyers in the right locations. In today’s market the most important thing is to establish not just who wants a property but who can afford it, but that doesn’t mean ruling out luxury homes.
High quality individual developments in sought after locations can in some ways be recession proof in that they are aimed at affluent buyers less affected by the ups and downs of the economy or a restricted access to mortgage funds. The target market may be smaller but it can still be profitable for developers able to produce a top quality product”.