But that very same government is also desperate to have people build new homes, so it’s taken steps to make smaller development projects as attractive as possible. The undeniable sweet spot is projects that involve converting brownfield sites into residential use, such as office conversions or putting flats above shops. This is mainly because these types of projects now have permitted development rights that allow you to change the use of the building without all the hassle and risk associated with gaining full planning permission.
But what about smaller projects such as house flips and refurbs? Unfortunately, these aren’t going to work so well in a market where property prices are falling. You ideally want to be flipping at a time when the asset you’re refurbishing is increasing in value month on month, not dropping. With house prices due to fall in 2023, you’ll be swimming against the tide. Better to wait until 2024/5, when prices are likely to be on the rise again.
So, why could the timing be perfect for tackling a small-scale development project? Three key cost factors are involved in any development project; the price you pay for the asset you’re going to develop, the cost of doing the development work, and the price you sell your finished units for. If we can optimise all three of these, we’ll be on to a winner.
Starting with the cost of the asset, we’re talking here about buying some type of commercial property or shop. As the economic downturn continues to bite, more businesses will struggle to survive. Some will go bust, while others will sell off assets such as property resulting in more properties in the market, which, in turn, puts downward pressure on prices. Also, many commercial landlords have been holding out, hoping to sell their properties to developers for top dollar. Only now they have a problem. Not only are commercial property values on the way down, but the cost of maintaining those properties has gone up significantly. Mortgage repayments, energy costs, not to mention security, and general maintenance – all of these have increased. It’s created a situation where the value of their property is decreasing, and the costs of maintaining it are growing. In other words, the sooner they sell, the more money they will make. This will lead to many more commercial properties hitting the market in 2023, adding to the downward pressure on prices. It’s difficult to predict precisely when the market will bottom out, but somewhere from mid-2023 to early 2024 would be my guess. So, you should be able to lock in some excellent value by buying next year.