Is property development still profitable?

Long-term figures point to the sustainability of buy-to-let mortgages

Is UK property still a good investment?

Property development is without a doubt one of the most sustainable and rewarding investment opportunities in the UK.

Over the past 20 years, the desire to enter the property market through buy-to-let purchases is becoming increasingly popular.

Long-term figures point to the sustainability of buy-to-let mortgages.

Economist Rob Thomas calculated that net annual returns have averaged at 16.2%, compared to a lower average return of 6.2% on UK equities since buy-to-let mortgages were introduced in 1996.

Due to increased economic uncertainty on the back of Brexit and in the current pandemic, it is understandable that those looking to get into property demand a full and extensive understanding of the market and the likelihood of making a worthwhile profit before investing.

Is it a good idea to get into property development in 2020?

the-avenue-eastbourne-development-finance-4Although things are rocky in our present moment, the opportunity to achieve financial freedom through property developing still exists.

Since the start of 2020 when the UK formally left the EU, many investors have been cautious about buying property.

This fear, combined with the COVID 19 lockdown, resulted in the property market slowing down to an almost halt during the March lockdown.

Residential property is a cyclical market, it has ups and downs in the short-term but generally, the opportunities to gain a high profit through property development remains.

Although we are currently in a recession, there is a steady increase in housing prices.

Demand is high, supply is low and sellers are therefore in control.

On average, UK house prices increased over the year in England to £247,000 (1.1%), Wales to £162,000 (2.0%), Scotland to £152,000 (1.6%) and Northern Ireland to £140,000 (2.5%).

Since housing prices are going up and demand is high, this is a very lucrative moment to get into property development.

With buyers still making the most out of the halt on the stamp duty tax, it does look like a healthy market of buyers could be on the horizon.

Tips to ensure you will make a profit on your new build

  1. Always work backwards from GDV when calculating purchase price: this is the best way to work out what you should be paying for a property or land plot. You may want to be a bit pessimistic about this, as it means you are more likely to stay within your budget and receive your expected returns.
  2. Do your research!: if you are working with an agent when buying land, for example, remember they often make a commission if you buy. This means they may skew or over/underestimate figures to persuade you that the land has more potential than it truly does. To avoid this becoming a problem, do your own research and look specifically at how other similar properties in the area have sold.
  3. Cut costs where possible: outsourcing to experts will save you a lot of money in the long term, and you don’t have to always choose the cheapest option to keep costs low. Instead, it is more beneficial to have a detailed budget drawn out in advance so you can allocate your spending appropriately and keep track of your costs and expected profit.
  4. Draw up formal contracts with builders: an essential aspect of any business is to have things drawn up in a contract, therefore protecting yourself from additional costs and pushed back dates and deadlines.

Ready to make money through property development?

At Hunter Finance we have helped over 150 property developers large and small in the last 8 years.

We use our own funds, which means we can accept clients when banks say no. Read about how we helped this developer become a millionaire with their first-ever property development.

We say yes when banks won’t back your project.

Click here or get in contact on 01825 749721.

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Property page updated on 3rd June 2021 by James Bougon