Real estate consultancy Colliers has warned that planning reforms alone will not be sufficient to achieve the government's housing targets, as long as decision-makers fail to address the significant profitability issues faced by developers.
Andrew White, Head of UK Residential at Colliers, stated that the economic conditions for residential property development have changed significantly. This change is impacting developers' ability to profitably implement new projects and thus contribute to meeting housing demand.
Challenges for Developers
The government views the acceleration of approval processes and the reduction of planning hurdles as a central approach to increasing construction activity. However, Colliers points out that the underlying economic viability of a project is crucial. Rising material costs, a shortage of skilled workers, and increasing regulatory requirements, particularly in the area of sustainability, are significantly burdening the cost structure of development projects.
The market is also facing increased uncertainty, which makes potential investors and developers hesitant. Construction costs have experienced an unprecedented increase in recent years, pushing the profitability of many projects to their limits, even if they successfully navigate the planning phase.
Recommendations for Policymakers
Colliers therefore calls for policymakers to go beyond mere planning reforms and implement targeted measures to improve the economic situation for housing projects. This could include incentives for developers, simplifying the provision of building land, or reducing the financial burden of duties and fees. Without such a comprehensive strategy, achieving the ambitious housing targets will remain a distant prospect, as the projects simply will not be viable.
Adjusting political strategy to current market conditions is essential. It is emphasised that a holistic approach, which considers both planning acceleration and economic conditions, is indispensable to create the urgently needed housing and achieve the goals set by the government.
