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Advice for new developers

Whether you are looking to build a new home for yourself or a property to rent or sell, careful planning will help you achieve your aims. With 40 years’ experience in the London property market, KFH can guide you through the process to give your project the best chance of succeeding.

Acquiring land or development opportunities

Opportunities to acquire land or development prospects can be found through a variety of sources, including: 

  • Estate agents
  • Auction
  • Off market (private sales)
  • Other ads

Once the land has been found, you may be able to buy it outright; however, if there is any doubt about obtaining planning permission, this could be a risk. To mitigate such risks conditional contracts, known as ‘Option Agreements’, can sometimes be agreed with landowners. These contracts often include stipulations that state if the planning permission is not granted within a specified timeframe, the contract is no longer binding. If the conditions of the contract are met, i.e. the planning permission is granted, the developer is obliged to buy the land. This is the most common process advised to new developers.

There is also a less common ‘Option Agreement’. The terms will be similar except that when the planning permission is granted, the buyer has the option of buying but is not obliged to buy. 

In both cases the agreement will be in place for a set period of time, and if planning permission is not granted within that time, it can either be extended or it will lapse. To set up an ‘Option Agreement’ a premium is usually paid by the developer to the landowner. 

Our Land and New Homes division can offer advice and assistance if you are considering acquiring or selling land.

Planning permission

Planning permission is required for most new buildings and any major changes to existing buildings. Under Section 62 of the Town and Country Planning Act 1990 full planning consent is required for all development projects excluding householder developments.

Planning permission applications can be made online, and the Land and New Homes division at KFH can provide guidance through the various stages of the application. 

Local regulations

When applying for planning permission for more than nine residential units in London, there are certain local obligations to consider, such as affordable housing and tenure options. Awareness of these regulations upfront can avoid delays and added expenses in the later stages of planning.

For larger residential developments the mix of housing types needs to be negotiated with the Local Planning Authority, and this will be steered by the Local Development Framework, which forms part of the London Plan - the overall strategic plan for the Capital.

Feasibility study and market research

For developers looking to sell or rent the finished property or properties, thorough research of the local market demand will help determine whether the plans meet the needs of the area. This research, for example, will indicate whether building several small flats or one large family home is the most viable option.

Market research should be thorough, carried out at the earliest opportunity, and include: 

  • Local economy: The Local Planning Authority (LPA) can provide data on the local economy, e.g. population, housing, planning trends, business, employment and wages so the most suitable development for the area can be identified
  • Social demographics: The Office for National Statistics (ONS) provides various neighbourhood statistics and census data to help developers understand the demographic of a given area
  • Environmental impact: The research should include site appraisals that will alert developers to whether an Environmental Impact Assessment (EIA) is required
  • Accommodation mix: The results of this research will help determine the best type of accommodation for the area, and how many single and double rooms each unit should have
  • Budget evaluation: Having and experienced second opinion assess the project’s projected costs, and stress-test how it will be financed, is an invaluable aid to first-time property developers

Experienced experts will be able to assist you with this research, contact our Land and New Homes division to discuss your requirements.

Specification and finish

The specification and finish of the development should also suit the needs of the local market. Whether a high-spec finish or more simple fittings are chosen, they will need to be fit for purpose and conform to building and safety regulations.

While building regulations will influence many aspects of the work, there may be extra criteria to fulfil depending on the type of development. For example, Houses in Multiple Occupation (HMOs) require fire doors where there are cooking facilities.

Mixed use

Developments comprising a blend of residential, office and retail units are known as mixed use developments. Such developments can help foster a sense of community and appeal to many residents, as many of the required amenities are nearby.

Contact us today for advice on residential, non residential and mixed use property development.

Finding the right architect

Whether an architect is employed to manage all or part of the development project, finding one with the relevant experience will help the goals of the project be achieved. 

The Royal Institute of British Architects (RIBA) lists architects by practice type, and the preferred architect’s credentials can then be checked on the Architect’s Registration Board (ARB), where all UK architects are registered.

Financing the development

Before embarking upon a development project a preliminary assessment of funding options should be undertaken. Unless self funded, the following sources are the most common:

  • Construction and development loans from a commercial or high street bank, or property finance specialist
  • Mezzanine finance – funding of the shortfall between the finance offered by the lender and the capital required to carry out the development project
  • Bridging finance – a short-term secured loan to bridge a temporary cash shortfall
  • Finance from a joint venture partner 

Joint ventures help spread the costs of financing of a development and may also bring valuable new skills to the project. 

Build to sell

Financing a development that is to be sold means that any initial loans to pay for the development can usually be paid off when the transaction is complete.

A property that is vacant for a period once the development has been completed, can result is delays in paying off any loans. KFH can help ensure developers have a buyer in place to minimise costly void periods. Selling ‘off-plan’ (before the build is complete) can also help in this respect. 

Build to let

Build to let developments require different financing, as the loan is unlikely to be repayable as soon as the residents move in. Instead, rent collected from the new tenants is usually used to pay off the initial loan in instalments.

Once again, finding a tenant to move in soon after completion will reduce void periods and keep costs down. KFH manages a broad database of tenants looking to rent properties in London, so will be able to quickly help you find a suitable tenant. Contact our lettings division for further information.

Other factors to consider for a build to let development include: 

  • The potential rental yield for the property
  • The length of the tenancy
  • Whether furnished or unfurnished properties would be most suitable
  • Whether short-term letting is a viable option for the property 

Selling the development

Land that has planning permission approved is often more attractive to a buyer than land without planning permission, and some investors will sell the investment at this stage before any construction has begun.

Upon the development’s completion, the developer will sell or let the properties. The developer will also have the option of selling the freehold, or keeping it and collecting ground rent from the properties’ new owners. If the developer chooses to sell the freehold, they may choose to sell it to a third-party investor, or to the residents.

Marketing the development

When it comes to marketing the development typical options include property brochures, online property portals such as Rightmove and OnTheMarket, and local estate agents.

If the plan is to sell all or part of the development off plan, i.e. before it is finished, artists’ impressions and floorplans are often used to show prospective buyers how the finished development will look.

Pricing of the development or individual units should be forecast as part of the feasibility study, but researching the local property market and utilising online property portals when the project is near completion will identify any intermittent market fluctuations.

With over 35 years of experience in the London property market KFH can provide expert advice and guidance to new developers. Contact us today to discuss your property requirements.

Contact our Land and New Homes team

Contact our team today to discuss your requirements.

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