Residential development profits are subject to greater pressures than ever before, says Knight Frank’s latest regional residential review.
The report states the latest PPG 3 housing guidance will cause problems in supply terms due to the need for sequential testing.
However, the study says regional economies continue to ride on the wave of increased activity in the greater London and south-east regions. As yields have hardened across greater London and the South East, small and large investors are looking further afield for new opportunities.
Good yield performance teamed with capital growth prospects has ensured that ‘off-plan’ sales in the regions have been greater than in London.
But the shortage of land remains a burning issue, which, coupled with delays in the planning process, continues to impact on supply.
Intense competition in the regions between commercial and residential developers has resulted in developers vying for the same sites. The shortage of land and sites for residential use has spurred redevelopment of 1960s and 1970s former office buildings which have become too expensive to update to current IT requirements.
The competition has impacted on land values, meaning new opportunities have had to be found at a more speculative level in less mature locations.
EGi News 27/04/00
