Mention the word “affordable housing” in the context of property development and the chances are that many people will automatically (and understandably) think of the requirement for (most) new developments to include a certain percentage of what is officially considered to be affordable housing. Let’s set this aside for one moment and focus on what the term “affordable housing” actually means, which is exactly what it says, houses people can realistically afford and the reason developers need to start prioritising this is because it’s the only way for them to maintain sustainable businesses.
Why the internet could put UK-based property developers out of business
Terms like “digital nomad” and “coffee-shop professional” may sound pretentious, but they reflect the way the nature of business is changing. There have been “home workers” throughout history, but as the world industrialised, the idea of “work” came to refer to a place as much as an activity. Now not only is it increasingly possible for people to work from home, but it is increasingly possible for that home to be far away from where their clients are based, even in another country. The digital economy, for example, is arguably truly global. Set against this backdrop, it is hardly surprising that digital workers and skilled professionals, particularly young ones, the famous millennials, will be looking at their options and asking themselves if they really want to stay in a location where they will be forever renters or move overseas to somewhere they can afford to buy. An exodus of young adults will ultimately be felt not just in the first-time-buyers market but later on in the market for family homes and then retirement properties. This may seem like a far-fetched scenario, particularly since Brexit may make it far more difficult to emigrate to another European country, but the reality is that many countries actually want to attract skilled talent, particularly younger adults.
Developers need to concentrate on delivering value rather than up-selling
Up-selling is key to many sales strategies and it’s everywhere, from online retailers who suggest purchases based on your browsing history to supermarkets placing “treat” purchases at strategic locations (particularly next to the tills). It’s also, often, part of the strategy for selling homes. Developers can add desirable features, anything from luxury finishes to steam showers and put a mark-up on them. This may actually deliver genuine value to the purchaser in the sense that even though the developer makes a profit on these items, the developer’s bulk-buying power can mean that it is still possible for them to deliver these niceties to the customer at a much lower price than the customer would have paid buying retail. At this point, however, the problem is that land values in the UK have driven house prices up to such an extent that potential buyers, especially younger ones, are being driven out of the market and, as previously mentioned, there is a strong possibility that this will result in some of them at least choosing to move overseas instead of staying in the UK.
Time for a radical rethink of the UK property market?
Sometimes when you appear to be up against a rock and a hard place (rising land values and other costs versus stretched buyers), the solution is to try something entirely different. For example, co-living spaces are popping up across the world and are currently making their mark in London. These are essentially spaces where residents have very limited private space, which is compensated by access to communal spaces and communal facilities. At current time, these are focused on the rental market, however in principle there is nothing to stop the idea being adopted for the sales market or adjusted to make it more suitable for families as well as those pre- post- or without children.