De-Risk Your Development

As we are all aware, anything could happen in the UK Housing Market and the press is either telling us that we are in a boom or a bust.deriskblogimage

Clearly at the moment the Housing Market is running along quite steadily which is in part no doubt caused by a shortage of housing. That said it is a notoriously fragile and with the EU ‘in or out’ referendum looming no one can be absolutely certain of what lies ahead.<!–more–>

We are already seeing what the forthcoming change to the SDLT has done to the market with investor transactions going through the roof to try an beat the deadline.

So, it seems to me at least that developers of larger schemes where the units are to be sold on the open market to home owners or investors are very much open to the vagaries of market forces and of course government intervention.

It makes sense I believe for the developers to perhaps look to de-risk their exposure as far as is possible and one way to do this is Forward Sale the development to a corporate buyer with ready funds.

If for instance you are developing a scheme of say 150 units and relying on the on selling 75% of the projects stock before getting in to profit then perhaps it is worth selling the development ‘lock stock and barrel’ to one buyer.

Yes the buyer will want a discount of between 10%-15% but not only does this guarantee you a profit but it also saves you a considerable amount of money by way of Estate agent and solicitor selling fees.

For those of you involved in schemes of 50-300 units I think this is something that you should consider as part of your exit strategy for the scheme as some corporate buyers will even consider buying the remaining unsold stock  of part sold projects

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