Houses or Flats – What to Build?

by | Jun 10, 2021

In the UK real estate market, the rule of thumb is that you build flats in city centres and houses in suburban, semi-rural and rural areas.

And to a large extent, that rule of thumb holds true. But not always. And that’s why – when deciding between houses and flats – it’s essential to research demographics, supply and demand in the local real estate market.

Here are key metrics to research when making the decision. Analysing these will put your development in a strong position to succeed – and give you a strong investment case when approaching residential development finance lenders. To assess and stress test these metrics, speak to trusted agents and professionals locally and use resources like REalyse and the Government’s Housing Delivery Test.

Demographics

  • Population – How is the area trending? Is the population increasing or decreasing?
  • Household size – Couples? Families? Intergenerational living?
  • Household age – What are the trends around young professionals vs children vs retirees?
  • Employment characteristics – What kinds of jobs are there? What are wages/salaries like?
  • Household income – And how much can they afford to spend on housing?

Market depth and absorption

  • Sales prices and sales velocity over the last few years – What are the trends for houses vs flats in the uk real estate market? And for different sizes of house/flat? There’s no point building something if similar units have been sitting unsold for months
  • Projects in the pipeline – What’s already in development? What’s in planning? Understand what the competition will be like when your units are ready, so you’re not building for a saturated market

Desirable features

Talk to knowledgeable estate agents to see if there are voids you can fill. For example:

  • Unit size – Are families struggling to find good housing because there aren’t enough 3+-bed units on the market?
  • Floorplan – Is open plan still desirable, or are people looking for more privacy with the rise of home working? How much storage and closet space is required? Families and downsizers may need more than young professionals
  • Outdoor space – Are people in the area looking for better outdoor space since coronavirus? Are communal areas desirable, or is there more focus on private space?
  • Amenities – Is there demand for gyms, cinema rooms or bike storage?
  • Accessibility – If household age is trending upwards, is there more demand for lifts and/or bungalows?
  • Transport – How important is proximity to public transport and employment? And what about parking? How big of a garage are people looking for?

Use this real estate market analysis to build your deal memo

This uk real estate market analysis will help you decide whether houses or flats offer the best opportunity for your location. Then, sell that story in your deal memo when approaching residential development finance lenders.

Lenders will ask these questions when assessing your project, so having credible analysis to back up your investment case will make it easier to secure property development finance quickly.

Keep on top of UK real estate market trends: Download Hilltop’s UK Residential Market Report 2021.


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