Permitted developments are a great tool in the fight against housing shortage, but what makes a ‘good’ development case?

It’s accepted across the industry that there is a real imbalance when it comes to the supply of residential property compared to demand from would-be buyers and tenants. For example, according to data from estate agent trade body Propertymark, the average member branch currently has 23 properties on its books.

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Alex Upton | Hampshire Trust Bank
16th May 2022
Alex Upton Hampshire Trust Bank HTB
"The importance of location when it comes to property may be something of a cliche, but it remains absolutely crucial, particularly for permitted developments."

However, they also have 590 registered homebuyers, meaning that for every property that goes onto the market there are an average of 26 potential buyers.

Permitted developments have been a useful, if controversial, tool for correcting this. Allowing the conversion of commercial units into residential homes means more properties for those buyers to take advantage of.

Yet it’s important to recognise that there are certain factors which boost the chances of success for a permitted development, which will determine just how profitable the venture ends up being for the developers involved.

So what are those features that help underpin quality permitted developments and which brokers should keep in mind when advising clients looking to undertake such a project?

Location, location, location

The importance of location when it comes to property may be something of a cliche, but it remains absolutely crucial, particularly for permitted developments.

The best permitted developments take place on buildings which are not located in exclusively commercial areas; it’s important that there are other residential properties nearby, as well as the sort of shops and amenities that you expect from a residential area.

After all, there’s no point converting part of a commercial property into some lovely looking residential units if nobody is going to want to live there.

That’s not the only location consideration though. The building will need to look like a residential building, or for changes to be made to adapt its appearance, for example by altering its facade and fenestration.

What’s more, its appearance will need to be in keeping with residential properties in the area. Essentially, a quality permitted development not only looks like a residential property, but also looks like the existing residential properties around it.

In addition, it’s helpful for the building itself to be in good condition, with no major structural work required, as well as for it to not be of an age where the original construction included hazardous material like asbestos. It should also go without saying that there should be no non-compliant external cladding in place.

Who is the target market?

With any property development, it’s crucial for the developer to have a clear plan in mind of who their target market is, and therefore their exit plan. Some will want to appeal to owner occupiers, with the intention of selling the unit on once the work is finished. Others however may want to retain some of the units as an ongoing let. This is certainly true with permitted developments.

Ensuring that the finished units appeal to that target market, whether buyers or renters, will make a difference to the prospects of a project. That may mean delivering a mix of unit types and sizes, as well as making sure the finished units are in keeping with other residential units in the area.

Obviously, the developer will want them to stand out from the crowd in terms of the quality of the property, but it’s useful for them to be at least comparable in terms of size and price point.

Experience is key

Finally, as is so often the case with development finance, experience is vital. Permitted developments are not straightforward at the best of times and can throw up all sorts of unexpected challenges. Having experience not only within the development world but specifically with conversions will make a huge difference to the prospects of any permitted development case from the get-go.

Of course, experience isn’t only important with the individual client but with the funding partner you use for a case. Working with a lender like Hampshire Trust Bank, with extensive hands-on, specialist experience within the development world, ensures that the client enjoys a stress-free process and understanding of how projects can shift over time.

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