The whole reason for a property developer to build a housing development is to sell it. In order to maximise return on investment, it’s critical that they plan their project comprehensively, both in terms of completing the project within the optimum timeframe and by considering in advance the best time to launch and best format for selling their development.
When are the Best Months to Sell a Development?
The best months of the year to sell a development tend to vary with the seasons and the annual events that occur between January to December. Let’s look at how the quarters vary in terms of property sales trends.
The start of a new year is usually regarded as a time of new beginnings and fresh starts. People will be considering what they want to achieve during the months ahead, such as buying a new property.
Activity in the buyers’ market picks up from January onwards. Those people looking early in the year are often at the start of their property search and may take some time before they have seen enough properties to feel they can start making decisions.
So, rather than launch a development in January, it can be better to wait until mid February when the real buying action happens. This means that your properties will be fresh to market and more desirable during this busy time of late February and March.
Spring is the most popular time of the year to buy and sell. The Easter Bank Holiday weekend, which usually falls during April, traditionally triggers a turning point for activity as more buyers have some extra time to consider their plans and arrange viewings.
There are a number of reasons why spring is deemed the most popular time of year. As the days get longer and warmer, people are usually more upbeat and prepared to spend time house hunting. The brighter days are when properties look their best and gardens are in bloom. In addition, people with children are keen to buy properties at this time so they are in a position to move to a new home during the school holidays.
However, developers need to bear in mind that during this popular time, they can expect to be up against the greatest number of competing sellers and properties, as everyone else also tries to maximise their sales.
There is usually a slowdown in buying activity during the months of July and August as people take summer holidays, so buyers and associated services, such as conveyancing solicitors and financial advisors, are away. Also, families with children will be focusing on the school holidays and people are generally enjoying the summer days, so less inclined to spend their time house hunting.
September is a key month as people return to work again after the summer break. There is usually an increase in activity from those thinking of moving into a new home in time for Christmas. September can often have good weather meaning that properties are still showing well.
October can be another crucial month, both for selling properties and for launching developments that will be completed in the following year.
It’s often a great month of the year for selling properties. Buyers may have spent September viewing properties and now be in a position to make a decision. If you have properties completed or close to completion, buyers will be highly motivated to make a decision so they can move in time for Christmas. There will typically be fewer buyers in the market during the autumn months compared to the spring, but more that tend to be serious.
From mid November, the market drops off. From then until the end of the year, the focus is on Christmas preparations and properties do not view as well due to the winter light, so people will put off their search until the New Year. As a result, November is arguably the worst time to come to market.
Different Types of Property Can Sell Better at Different Times of Year
It is not the case that all property types sell evenly in line with the overall seasonal trends. Different types of properties appeal to different types of buyers, and these buyers are often active at differing times of year.
Here are a few examples:
Development Type – One- and Two-Bedroom Flats and Houses
If a developer’s target buyer for these smaller properties are first time buyers and young couples, the best time to sell this development is likely to be January, February and September. These buyers are often prompted to buy in the New Year after realising over the Christmas holidays that they don’t want to spend another Christmas at home with their families and need their own place. It then follows that they will be similarly active in September after the summer holidays so that they can get into a new home by Christmas.
Development Type – Three- and Four-Bedroom Family Homes
This development type is likely to be aimed at buyers moving up the ladder in terms of property size who already have children or are planning to do so. The best time to sell to this buyer is likely to be during term time so that they can schedule their house move around the school holiday period and minimise disruption to their family.
Development Types – Bungalows and Retirement Homes
The target buyer for this style of development tends to be downsizers and those approaching retirement or already retired. They are likely to be more active during the warmer months between June and September when they are more inclined to view properties and will be less affected by buying trends around the school holiday periods.
What Other Factors Determine the Best Time to Sell a Development?
Whilst time of year is a crucial consideration for developers to consider when to sell their projects, there are other factors that can determine the best time to sell a property.
Local Absorption Rates
Activity trends within the local market have an impact on the rates at which a development will sell.
An absorption rate is calculated by dividing the number of sales in a given month by the number of available homes for sale. In stronger areas with higher absorptions, developers are able to build homes at a faster rate and sell them at the value they expect.
Developers need to have a thorough understanding of how long it generally takes to sell property in the local area around their development and which type of properties tend to sell fastest.
It will be crucial to speak with local agents and authorities to find out typical property buying trends in the area. Another useful tool is PropCast™ from house selling advisors, The Advisor, which shows levels of buyer demand in the UK housing market by postcode.
This type of research should be undertaken whilst a developer is in the very early stage of planning a development to inform their decision-making about the style of the development and its target audience. It will be crucial for them to keep up to date at all times to tailor their plan for building, selling, and promoting the development to suit the local market conditions and target audience.
As discussed under ‘Quarter 1’ above, competing activity from other property sellers is a key consideration as to when you sell your development.
In line with the general laws of supply and demand, in order to get the very best price for your development’s properties, it is not just about high levels of demand, you also need low levels of supply.
A developer’s local research will need to assess the potential competition from other new build developments.
Ideally, they will ensure that their properties stand out and perform well in times of both high and low supply by using strong design, quality finishes, excellent locations, and attention to detail. They may decide to adjust the release time of their development to avoid directly clashing with the launch of competing properties.
External events such as government intervention e.g. changes to stamp duty land tax, Bank of England intervention e.g. changes to interest rates and economic uncertainty can create conditions which impact on a developer’s decision to release a development.
For example, if a change in stamp duty thresholds will impact on the types of properties in their development, they may take measures to speed up the delivery of their properties in order to secure sales before the changes are in place.
Key government initiatives that have had a significant impact on the delivery and sale of housing developments in recent years are the government’s targets for the rate of delivery of new homes and the percentage of those homes that should provide affordable housing.
According to research by leading UK planning and development consultancy, Lichfields, for both large and small-scale sites, developments with 40% or more affordable housing have a build rate that is around 50% higher compared to developments with less than 10% affordable housing.
What are the Options to Build and Sell at the Same Time?
The stage at which a developer starts the process to sell a development will also be determined by the scale and nature of their development and their model for sales.
For example, the developer of a very small site of one or two properties may simply wait until the build is well advanced before bringing them to market. Large developments, which will be delivered in phases, may make use of show homes to create interest and drive early sales. For the release of an exclusive development of luxury apartments, the developer may try and sell their apartments completely off plan before any construction starts.
Use of Show Homes & Off Plan Sales
Developers have traditionally used show homes as a tool for illustrating the quality and finish of their properties.
Improvements in the capability of technology have meant that developers are now able to offer increasingly accurate and realistic images of how a property will look and feel through Computer Generated Imagery (CGI) and fly-through videos. This is proving to be of great assistance in the sale of off plan developments.
The decision to build and sell a development at the same time has the advantage of securing purchasers, which is good for financing the build project. It also enables the marketing team and agents to create a buzz around a development to attract interest from other buyers by highlighting the percentage of the properties already sold.
Impact on Completion Times
Selling properties whilst a development is being built can put more pressure on the build time of a development.
A developer will need to give the buyer an idea of when the new property will be completed and provide a detailed construction plan that identifies key dates.
Lichfields’ research mentioned above found that the average build rate increased as the size of the site increased, but not proportionately. A larger site can increase their output per year because there tend to be more sales outlets on a bigger site, so different types, sizes, and prices of houses are available, meaning they can tap into a wider pool of buyers.
There are clearly a wide range of factors that a developer should consider when deciding the best time to complete a development.
Seasonal trends will provide them with a strong starting point on which to base their decision, but they should also take into consideration key influences such as local supply and demand, government interventions, and the economic environment when deciding at what stage they come to market and their sales strategy.
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