Planning delays, rising information requirements and high debt finance costs are continuing to suppress development activity and land values across the South East, according to SHW.
The property consultancy’s Q3 South East Development Focus found developers are becoming increasingly selective about acquisitions, concentrating on prime locations unless sites elsewhere offer a compelling opportunity.
Residential development is also being affected by subdued house price growth and slower sales rates, while higher construction and financing costs continue to undermine scheme viability.
Across London and areas around the south-west M25, delays to pre-application and planning processes are stalling transactions dependent on securing consent, with overpriced development opportunities struggling to attract buyers.
VIABILITY UNDER PRESSURE
Peter Coldbreath, Partner at SHW, says: “Developers are being more selective and focussing on prime locations, unless there is a significant upside on considering non-prime locations.
“House price indices are largely flatlining and there is little expectation of change while volumes traded remain subdued. The uncertainty spilling into market sentiment from global conflicts continues to overshadow UK performance, and we are now watching closely to see whether the new administration can shift both sentiment and the underlying metrics.”
SHW says developers are favouring housing over apartment schemes, while viability pressures are contributing to demand for permitted development and conversion opportunities.
In Croydon town centre, consented permitted development schemes are expected to provide around 1,600 homes, although Building Safety Act Gateway 2 requirements have slowed starts.
Smaller sites suitable for family housing remain a focus across Kent, Surrey and Sussex, while some housebuilders are exploring strategic land opportunities in anticipation of an eventual improvement in market conditions.
CONSENT NO GUARANTEE OF DEVELOPMENT
Richard Plant, Partner at SHW, says underlying housing demand remains strong across South London but securing planning permission is no longer necessarily the biggest barrier to development.
“Developers are finding sales rates significantly below pre-2020 levels, particularly for higher-density apartment schemes,” he says.
“For most South London schemes, the main challenge is not planning permission but development viability. Elevated construction costs, Building Safety Act compliance, contractor contingencies, higher finance costs, slower sales and affordable housing requirements are combining to stall many schemes that already have consent.”
SHW says institutional capital remains interested in London’s Build-to-Rent sector, although investors are increasingly favouring operational assets and established locations rather than taking significant development risk.
In the commercial market, demand for realistically priced prime industrial and logistics sites remains robust. However, SHW says planning can take 12 months or more even on allocated sites, adding further cost and uncertainty to development.
