The increase in the number of property developing TV programs such as Property Ladder that have appeared on our screens in recent years has in so small part led to a property development boom in the UK, but is this boom now over?
There’s no question that these programs have dramatically increased the numbers of people trying their hand at property developing, with people watching these programs, seeing amateur developers making money, and thinking that they can do this themselves.
However, while it may appear easy, it’s also true that all of these programs have appeared on our screens at the same time that the UK has experienced a housing boom with prices rising over 10% a year in most areas.
This is the main reason why even the most inexperienced developers have made large amounts of money from property development in recent years.
You only have to watch Property Ladder to see people making a number of mistakes, disregarding the advice of experienced developer Sarah Beeny, and still making money. This is almost entirely down to the fact that they’ve been saved by house prices rising over 10% a year. If prices had fallen or remained flat, most of these people would have actually lost money.
Indeed with the current state of the property market, ie prices falling in a lot of areas, property developing has just become a lot harder. The days of the easy money are gone.
The success or failure of a project will now be influenced by buying the property at a good price initially, and keeping renovation costs to an absolute minimum. You will no longer have any room for mistakes as you cannot now rely on rising house prices to get you out of trouble.
This will ultimately mean that the professional developers will likely continue to make money from property development, but the amateurs, the likes of which you see every week on Property Ladder, will will not be skilled or experienced enough and will struggle to make money in this difficult property market when demand for properties is low.
Another factor is that with this reduced demand, the smaller developers, ie those developing one or two properties at a time may face long periods of time on the sidelines because they need to sell after the completion of a project in order to move onto the next one. The larger developers however can afford to hold onto their properties for the long term and rent them out, so they don’t need to sell and therefore are not affected in the same way.
So overall it would certainly appear that the property development boom could be over, at least for the time being. The professionals will continue to make money, but the less experienced ones will struggle to make money at a time when prices are stagnating or falling.