Why investing with the right developer can make or break an investment
UK property is growing fast. Market activity is increasing in Q4 2024, house prices are rising at the fastest rate since 2022 and rents are growing more quickly than wages.
For anyone looking to buy UK property, this is the ideal time to invest and make the most of the growth forecast in the next four years:
There is a lot to consider for both first-time landlords and seasoned portfolio investors, including:
All of that is essential to know, and a reputable property investment advisor can ensure you are equipped with all the knowledge you need.
However, the most important thing of all is choosing the developer. Get it right, and you can earn serious returns on your investment for years to come. Get it wrong, and you might not even have an investment in the first place.
Here are some of the key points to look for when looking at the developer of your potential UK property for sale.
Track record of completing developments
The first thing to look for is whether a developer has a track record of completing developments successfully. It is one thing to produce stunning CGIs and an attractive brochure, and another to then complete a building and deliver it to market.
It has been estimated that more than a third of all developments face delays and miss their projected completion date.
That is frustrating for owner-occupiers purchasing a new-build property who have to push their move-in date back.
It is also a problem for investors who will see delays affecting their business income. While it is true that capital appreciation will continue to accrue even when construction delays happen, you will lose out on rental income each month that the development is incomplete.
If you have planned for that income to make your investment viable, a delay is therefore a costly reality. Delays are unavoidable in some cases, but a reputable developer will keep them to a minimum.
A track record of completing developments on time in most cases is a strong indicator that your chosen investment opportunity is likely to be a good one.
For example, Vision and Axiom are the latest Purpose-Built Student Property (PBSA) developments from developer Abode Student which has a strong track record of delivering successful student accommodation developments on time.
That makes the developer a reliable choice for anyone considering an investment in the student sector.
Financial health
The next step is to consider the overall financial health of the developer. Even if they have a good track record of completions, that isn’t a full guarantee for the future.
Figures from the Insolvency Service show that 4,310 construction companies declared bankruptcy in the year to August 2024. All of those events will have contributed to instability and delays on site in some way.
Construction is complex and there are many businesses involved. Planning, design, procurement, contracting and construction are just some of the areas involved in every development. All of them can be vulnerable in the right circumstances – making it a good idea to look into the financial health of the developer and related parties before investing.
Some indicators you can look for include:
For example, while analysis from EY Parthenon shows that 48% of companies in the Household Goods and Home Construction FTSE sector issued a profit warning in the last 12 months, most of those were for household goods manufacturers and suppliers.
Big housebuilders are issuing fewer profit warnings than before, pointing to a healthier sector overall. That means you can invest with more confidence as long as you choose the right developer.
On the other hand, indicators of good financial health include:
The current state of housebuilding makes it easier to spot the developers in good financial health.
Savills estimates that approximately 200,000 new homes will be delivered this year. That’s 10,000 fewer than each of the previous two years and reflects a range of factors including materials and worker shortages.
Those same economic factors have caused only 230,000 new homes to be granted planning permission in the last 12 months according to the Home Builders Federation. That is the lowest the number has been for a decade and demonstrates the pressures developers are under, even at a time when construction activity is increasing.
However, for investors that makes it easier to find developers who are in good financial health. You be confident that developers with sustainable long-term pipelines in this environment are a good bet for investment.
For example, Obsidian is the latest new development close to Manchester city centre from Salboy. It is one part of a long list of projects that they are either building now or have planned to start in the near future – a great indicator of reliability.
Your dedicated property advisor can help you navigate this issue and provide the most recent updates on any specific developer that you are interested in.
Quality and delivering the specifications advertised
The third important factor to consider when choosing the developer is whether they deliver the quality and specification that they initially promised.
Firstly, you want your property to be what you paid for. If the price is higher thanks to a better quality specification, everything you paid for needs to be in the property on completion. That can mean superior materials or a better class of furniture and white goods, for example.
Secondly, a higher quality property with a better specification can lead to higher rents and increased income.
A survey from Molo Finance shows the potential importance of a higher-quality property:
Those are just a few examples of the impact that a high-quality build and specification can deliver to the landlord.
Choosing a property which includes those is a good way to increase your return on investment and make sure that tenants are queuing to move into your investment.
However, you need to make sure that you choose a developer who delivers on their promises and has a reputation for quality, otherwise, you won’t get those benefits.
A good example is Forshaw Group which has long held a reputation for delivering properties which offer a rare level of quality. The developer is a family-owned business with almost half a century of property experience. That background shines through in the level of care they put into each new home.
Their latest development, VIVERE, is located in Manchester city centre and is sure to provide an outstanding level of quality for residents when it is complete. The company’s heritage and reputation for quality make it a great purchase for investors looking for Manchester buy-to-let property, too.
Communication
Good communication is another hallmark of a reliable developer. Right from the initial design stages, those developers who have the clearest plans will be communicating with buyers so that you know exactly what to expect:
All of those provide reassurance, and the more you know the fewer potentially harmful surprises there will be.
Open lines of communication are also key to understanding why any unavoidable delays occur, and then knowing what the timeline is for fixing problems.
In all of those ways, good communication can help you plan the future of your investment business and keep your portfolio operating healthily.
A good property investment advisor will be able to supply all of that information about a potential development as they will have a good relationship with the developer. Looking for good communication between your agent and the developer should therefore be a key factor when considering your next UK buy-to-let investment property.
Local knowledge and experience
Finally, choosing a developer who has local knowledge and experience can be the key to a good investment.
If they know the market, they are more likely to build buy-to-let developments which are:
All of those factors will give you the best chance of maximising rent, escaping void periods and enjoying the strongest possible return on investment.
Developments like W Residences and Waterhouse Gardens are two great examples of this principle in action. Built by developers deeply embedded in the city of Manchester, they are informed by local knowledge and provide exactly what the local market needs.
Want to learn more about UK buy-to-let property and discover our range of impressive investment opportunities? Get in touch with our experts today to learn more.