Peter Constable, a Partner in Clutton's Land & Development Division in Maidstone, reports that a survey of the firm's database over the last year reveals its developer applicant list is reduced, with 46% of developers no longer trading or in administration. Transactions are still occurring principally with developers/owner-occupiers who are seeking bargains and mainly within the small building plot sector (1-3 units) which are considered lower risk and attractive to cash rich developers and owner-occupiers seeking to capitalise on the opportunity to build their own homes while land values and building costs are down.
Further, Clutton's research shows that despite continuing uncertainty and reduced sales volumes, there are signs that transaction levels are increasing.
Most agents' registers confirm a fair number of cash buyers are being tempted to buy sensibly priced property. Buildings which need restoration, have potential for enlargement and ‘forced sales', particularly those sold at auction, are attracting buyers, provided they are competitively priced, although still subject to some heavy discounting and slower sales rates. Clearly, there are far fewer investors in the market and those remaining are looking to buy units at a large discount.
The apartment market is over-supplied and difficult to sell without large discounts (as much as 40% down from peak values in mid 2007). Some registered social landlords (RSLs) are picking up units from distressed developers at the lower prices.
Statistics published by both the Halifax and Nationwide indicate a 16% fall in house values in the past year. Such falls severely affect development land values, which have fallen by as much as 30 – 40% over the equivalent period, according to evidence collated by Cluttons.
Cluttons is finding that in the current market, Housing Associations are the main residential development land buyers, supported through grant funding from the Homes & Communities Agency (HCA), a new housing and regeneration agency for England, which will create opportunities "for people to live in affordable homes in places that they want to live in and for local authorities and communities to deliver the ambitions they have for their area". The Housing Associations are also seeking affordable rented accommodation units as opposed to shared ownership homes.
Signs of an increase in market activity are emerging and transaction levels are improving, with sales occurring for correctly priced property. Expectations are that 2009 will be a difficult trading year, but Cluttons suggest that we may be close to the bottom of the cycle and those buyers able to buy without funding or needing only low loan to value ratios should be well placed to capitalise on sensibly priced opportunities.