Forward-looking indicators suggest this lack of momentum is likely to continue for a while longer, with new buyer enquiries returning a net balance of -27% in March, marking the eighth successive negative monthly reading. This decline in buyer appetite continues to impact on agreed sales, with a net balance of -24% of RICS surveyors reporting a fall at the headline level.
It’s unsurprising, therefore, that the average time taken for a residential property to sell, from listing to completion, remains unchanged at 19 weeks, which is the joint longest since this series was introduced in 2017. RICS says the South East continues to exhibit the most protracted duration, with an average of up to 21.5 weeks — that’s approaching six months.
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Set against this backdrop, lenders are becoming more cautious with their valuations. We are increasingly seeing lenders using 180-day valuations rather than open market value.
So, in this environment, it’s important that developers should also be taking a cautious approach. There are still opportunities to make good returns on developments, but a well-planned exit is key.
If the only strategy you have for your scheme is to sell the units, then you could come unstuck and you might even struggle to refinance if you are high leveraged and suffer a down valuation.
In this climate, I would always look at the potential for buy-to-let as an exit, as it will provide you with more options and the lender with more comfort that there is a viable route for the scheme.
The market is tough at the moment and it is always better to have a plan B. But, if you are struggling to find a way to exit a development, don’t panic — there is usually a way forward. The trick is working with the right broker who knows how to find that way.