Home Commercial Property The six major challenges facing property developers

The six major challenges facing property developers

by LLP Reporter
8th Nov 22 4:50 pm

Market analysis by Unlatch, the new homes sales progression and aftercare platform for developers and housebuilders, reveals that a -16% drop in construction workers is just one of many challenges currently facing Britain’s housebuilding industry; a list that includes the rising cost of materials and the notorious EWS1 form.

A declining workforce

Over the past five years, the size of Britain’s construction industry workforce has shrunk by -3%, falling from 2.27m in 2017 to 2.21m in 2022.

Even more startling is the decline that Britain has seen in the number of self-employed members of the construction workforce which has fallen by -15.9%. In 2017, there were 852,000, today there are just 693,000.

In the past year alone, the number of self-employed workers in the industry has fallen by -3.9%, but there is a glimmer of hope as over the past year the size of the full-time construction workforce has grown by 1.6%.

This five-year decline can be attributed to a number of factors, but a major cause is the inability to attract new, young people to the industry. Complications brought on by Brexit means that a lot of skilled labour has now left the UK and those who remain are rapidly ageing.

To solve this challenge, the industry needs to work on attracting new people to the sector through more appealing career options, an increased number of apprenticeships, and better skills development.

But workforce issues are not the only challenge currently facing the construction industry in 2022. Here is a rundown of a few more.

Increasing costs

Brexit and Covid have teamed up to make it much more difficult to source primary construction materials. Languishing supply chain issues and a shortage of core materials means prices have increased by 24% in the past year.

To overcome this challenge, the industry needs to consider more flexibility in the stock it holds and begin to fastidiously plan for impending demand in order to avoid falling victim to supply chain shortages. The practice of establishing supplier loyalty also has a role to play and is even more important today than ever before.

Poor build quality

A lack of skilled labour and increased material costs are combining to result in reduction in build quality. New-build homes need to be of better standard. Refined building codes, a strong review process, and adoption of digital technology are a few ways that can support this improvement.

Low productivity

According to the ONS, productivity levels in the construction industry are consistently below the UK national average, based on factors such as low output, late project delivery, and reduced profits.

What’s more, labour wages and worker compensation in construction sit below that of the rest of the economy.

EWS1 form

In the wake of the Grenfell Tower tragedy, the External Wall System Fire Review certificate (EWS1) was introduced in late 2019. It was designed to be a way for money lenders to assess the external wall safety of buildings, most notably high-rise flats and offices.

However, one major problem facing housebuilders is the fact it takes up to a year to process an EWS1 and, without one, many mortgage providers are refusing to lend to potential buyers. This is causing a backlog in sales transactions which in turn causes a backlog in the delivery of new developments.

Mothballing land sites and a rise in Build to Rent

With purchasers potentially preferring to rent a little longer due to increasing interest rates and mortgage costs, developers may prefer to not start building until there is further clarity on these factors. Of course, this could see an even higher rise in BTR within developer and housebuilder businesses, where we have seen a huge rise on this side of the industry since covid lockdowns.

Lee Martin, Head of UK for Unlatch said, “It’s an astonishingly complex ecosystem out there at the moment. For housebuilders and developers, there are challenges both old and new waiting around every corner and, with each passing day and political decision, new challenges are created.

The only way such challenges can be well and truly overcome is for central decision makers to step up and make major changes to industry standards and best practice. But individual developers can go some way to improving their own fortunes by implementing smaller internal changes such as investing in digital technology to improve quality while reducing timelines and costs.

At Unlatch, our primary goal has always been to help developers create a more sustainable and accelerated sales approach through our unique PropTech software.

In doing so, we’ve managed to reduce the average exchange timescale to 25 days from point of reservation, providing a more seamless purchasing experience for both developer and buyer, whilst using the data and analysis we gather to save even more time for the marketing departments of our clients.

So while the sector remains susceptible to a myriad of challenges that we are yet to find a solution to, there are other ways that the nation’s developers can streamline their existing processes in order to improve performance.”

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