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Making the most of opportunities in a challenging property market

Resources

Making the most of opportunities in a challenging property market

This page was last updated on December 18, 2023
In this article we reflect on the headwinds in the residential property development and lettings market – and spotlight the allowances and incentives available to help businesses navigate the right course.

Eye-watering interest rate rises over the past year have put pressure on many businesses operating in the UK’s residential property development and lettings sector.

This has prompted lenders to review their commercial loan strategies and, in some cases, interest rates on finance products have gone into double digits, while other products are being withdrawn. This all means affordable finance options are more limited.

Economic indicators from the Royal Institute of Chartered Surveyors suggest falling residential property sales over the coming months but to then stabilise.

Housebuilding has also been negatively impacted. In September, Barratt reported that overall house price inflation was running below inflation in building costs and weighing on profitability.

Land and stock demand

The general slowdown is prompting land values to fall and making so-called land banking less attractive. As a result, for those with the financial capacity, there are potential bargains to be had in acquiring certain development sites.

In the residential lettings sector, a reduction in stock has caused rents to rise as demand outstrips supply. The Office for National Statistics reported in the Autumn that residential rental costs were rising at their fastest annual rate rise since records began.

There is, however, speculation that this may spur more first-time buyers to step onto the property ladder as house prices soften – good news for developers catering for this buyer segment. It also shows that for landlords looking to increase their portfolios, there is likely to be demand for additional stock.

A helping hand

While the general picture is sobering, there is still demand for property stock in the rental and first-time buyer markets. Given how tight profit margins are proving, it’s important to make the most of available reliefs such as:

It’s also advisable to be mindful of business group sizes to avoid hitting the £2m corporate interest restriction for total interest expenses.

In his Autumn Statement, the Chancellor promised to improve the current planning process and backlog to aid development. He also pledged £110m over the next two years for nutrient-mitigation schemes to boost residential property building.

At Shipleys, our property specialists help businesses with tax planning, VAT claims, valuations, forecasting, debt and business restructuring, as well as routine compliance. We also have access to specialist advisers and lenders, for example, to help businesses to find alternative sources of finance.

If we can help in any way, please speak with your Shipleys contact or one of our specialists shown on this page.


Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.

Copyright © Shipleys LLP 2023

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