Top 10 trends for developers in the 2nd half of 2022

Here we set out the 10 key trends for developers to watch in late 2022, which despite the stamp duty holiday ending, is still shaping up to be a stronger than average year.

1. The stock squeeze

With little sign of the stock squeeze coming to an end, housebuilders are benefitting from higher demand from buyers who were not previously considering a new home. Sellers struggling to find their onward purchase are considering all options, with many looking to buy new. 

2. The final months of Help to Buy

The remainder of 2022 is likely to see one large last hurrah from first-time buyers before the Help to Buy scheme comes to an end. For most developers, the price caps have already reduced the proportion of sales made using the scheme and it’s highly unlikely this figure will recover to pre-price cap levels. However, with the scheme coming to an end in Q1 2023, its final year is likely to see a record proportion of first-time buyers making use of it.

3. Filling the Help to Buy shaped hole

After the best part of a decade, the winding up of the Help to Buy scheme towards the end of the year is likely to leave a gap in the market for some housebuilders. Maintaining sales rates in a post Help to Buy world is likely to require a shift in purchaser profile. This will involve prioritising more off-plan sales to owner-occupiers in particular, which will likely involve increasing the number of houses sold off-plan which currently stands at 25%. Do not despair however, there is a potential solution on the horizon in the form of Deposit Unlock Scheme. See our previous news article on the new Deposit Unlock scheme for more information on how this works and how you can benefit.

4. Prioritising bulk deals

Bulk deal numbers are also likely to grow, taking the shape of pre-completion sales to both established build to rent operators alongside newer higher profile lender and retail entrants. Typically, they are building portfolios without offering the bells and whistles that build to rent operators do. This means they are more willing to purchase ‘off the shelf’ stock that had been designed and destined for the owner-occupier market.

5. A limited role for the off-plan investor

For the most part, bulk sales to larger operators will continue to replace off-plan sales to individual investors. In the years running up to 2007 and 2016, they made up most sales in some developments. The 3% stamp duty surcharge tapered demand and it seems unlikely to recover. Off-plan sales to individual investors are only likely to account for just 10% of all house builder sales next year.

6. Return of the overseas buyer

However, sales to overseas investors and owner-occupier numbers are likely to gradually recover next year after falling to record lows in 2021. While their return is unlikely to be as rapid as the market bounce back after lockdown, the reopening of European and American travel will likely provide a shot in the arm for prime new-build markets, particularly in London. But it is likely purchaser numbers from Asia will remain more suppressed given more limited access to international travel.

7. Cash will come again

The other market which has been slower to bounce back from lockdown has been the cash buyer. Typically these are older purchasers who are in many cases downsizing from a family home but have been nervous to move even as the pandemic has waned. We believe there to be significant pent-up demand from older owner-occupied cash buyers, many of who will turn to a new home as a hassle-free way of downsizing.

8. Continued house type optimisation

These shifting purchaser profiles and changing buyer priorities will see heightened optimisation of standard house types. Developers will increasingly need to incorporate flexible space for home working, particularly in more suburban and rural schemes where buyers will no longer head into the office every day. This brings opportunities too, with buyers who are not tied to the daily commuting distance of their office now searching over a wider area. It is these areas that we are forecasting see the strongest price growth next year.

9. Rising costs drive off-site construction

Rising material costs will accelerate off-site construction by increasing the number of factory-made elements as housebuilders seek to achieve savings. Builders relying more heavily on off-site construction have been more sheltered from rising costs and labour shortages. However, strong house price growth has helped shelter developers building from scratch on-site from rising costs to a degree. 

10. Increased personalisation

And with growing elements of the home built off-site, the opportunity for purchasers to personalise will grow alongside the desire from buyers to do so. Longer-term, greater personalisation is likely to broaden the appeal of new homes to a wider audience and generate greater confidence when buying off-plan. It will also potentially offer developers the opportunity to achieve higher margins on the back of higher specification finishes.

We Can Help

If you'd like to get in touch with us to find out more about property development you can contact our friendly staff at our Coventry, Nuneaton or Leamington Spa estate agents.

Adapted from an article published on www.hamptons.co.uk September 2021