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Property Developers: Surviving a Recession 2021 Guide

As fears of a UK double-dip recession rise, businesses across every sector are grappling to survive the unprecedented impact of COVID-19 on the economy. 

The housing market boomed in 2020 as demand rose post lockdown one and remained steady throughout the year with prices reaching record highs in August. However, the major housebuilders ceased all construction work for extended periods throughout the year to keep workers safe, so property developments, big and small, were halted or delayed.

What does 2021 have in store for the housing market, and how can property developers continue to thrive and grow their portfolios?

The Impact of COVID-19 on the UK Property and Construction Market

The Royal Institute of Chartered Surveyors (RICS) conducted a survey of its members last year to explore the impact of the pandemic on UK professionals in the property and construction industries. The findings revealed that 80% experienced a reduced workload and 67% had a fall in new business enquiries. Unsurprisingly, RICS professionals saw 47% of construction sites closed and 29% of projects cancelled.

The government has allowed work on construction sites to continue, even during the strictest “lockdown” phases, but most of the sector’s biggest builders felt obliged to close sites in March 2020 to prevent the virus from spreading. Social distancing on construction sites, as per government guidelines, is extremely difficult and many workers rely on public transport for their commute every day.

Homes England, the government’s “housing accelerator”, reported a 38% decrease in starts and a 25% fall in completions in the first half of 2020-21 compared to the same period last year. Partners of the organisation stated that between 60% and 100% of employees and contractors were unable to be onsite.

As the UK endures a third lockdown with no confirmed dates for an easing of restrictions, the outlook for the housebuilding sector looks unlikely to improve any time soon.

How Can Property Developers Overcome the Challenges of Recession?

Property and construction industries are often the worst hit by a recession. During the last financial crisis in 2008, eight construction companies went insolvent every day, representing a 40% increase in insolvencies. So how do the developers who survive manage it? What’s their secret?

  • Be Savvy with Your Budget

It stands to reason that if there is less business coming in, cutting non-essential costs is a smart move and the only way to stay afloat in an unpredictable economy. This could mean reducing staff hours or letting people go, but this may not be necessary. Reassess where your money goes and how it works for you — is it possible to switch to investments that will make up for lost sales and profits? Can you negotiate prices with suppliers? Do you have any stock left over from old projects that you could sell off for a profit? 

Conduct a full audit of your income and expenditure to see where you can free up some capital and compensate for any loss of revenue.

  • Invest in Your People

This may sound like a contradiction to point one, but your people are your biggest and most valuable asset. It might be tempting to ignore aspects like performance management and professional development when faced with the challenges of running a business in a recession, but looking after your staff will pay off in the short and long term.

Your team may be worried about the security of their jobs. Being open and honest about your plans will reassure and motivate them. Effective communication and strong leadership are essential to ensure that individual workloads don’t get out of hand and that staff receive the support they need to remain productive. 

  • Focus on Short-Term Projects

In the current volatile economy with government guidelines about what we can and can’t do changing by the day, it’s impossible to plan long term with any confidence.

Short-term projects allow greater control and are less vulnerable to unexpected changes that could result in delays, expense and lost sales. Smaller developments are also less likely to encounter supply chain issues as you only need to plan a few months ahead and can more accurately assess the risk of disruptions at the start of the project. 

  • Offer Something Your Competitors Don’t

With a shrinking pool of potential buyers, you need to stand out from your competitors and offer an exceptional customer experience. What services would attract people to your development and away from a competitor’s? Are there any additional services you can offer to make it easier for people to buy a property from you?

It goes without saying that the quality of your homes will need to be top-notch. Adding value with services that help people overcome barriers to buying and enhance the reputation of the brand will win you more customers, directly and through referrals. Offering a part-exchange (PX) scheme, for example, would allow someone who is struggling to sell their house to do so quickly while buying a new home from you in one transaction — everybody wins.

The year ahead looks set to be a challenging one for property developers, but even in the harshest economic downturns, some developers survive and thrive. The key to succeeding in a recession is developing the ability to adapt to changing circumstances, review and revise development plans, offer exceptional customer service and be smart with your budget. Carefully managed, 2021 could be your best year yet.

To find out more about how a part-exchange scheme could help you boost sales and profits, contact our team today. We work with developers across the UK and have 10 years’ experience as PX specialists.