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Your primary residence is likely to be the single biggest purchase in your life so what do you take into account when deciding where to live, Ofsted ratings of nearby schools, transport links, friends and family, nearby leisure amenities and work life balance?
Ben Cussons, Business Advisory Partner examines the choices we have to make when looking for a place to call home and explores the various factors that influence our decision.
What if, as society shifts, we are more focused on the carbon emissions involved in constructing our homes and whether or not the homes is “green”?
I personally don’t think we are at that point yet, but it is certainly something to bear in mind.
Property developers, like any business owners, aim to generate a profit and do that by maximising returns on the individual dwellings or a development on the whole. To do this they will want to build as cost-effective as possible, whilst maintaining the quality of the delivered product to market.
With a national housing shortage well documented and the costs of materials and labour at a premium, albeit they have reduced from the highs experienced in 2021, a developer will be very conscious of the costs of construction and the expected return and profit on sale.
Developers will assess the viability of a project by working backwards from what they anticipate the properties to sell for and deducting from this the costs to build, cost of land and general overheads. If the final figure that comes out doesn’t generate the wanted return, they will either revisit the plans or put them on hold.
Land prices aren’t going down either and the open market will dictate what a property eventually sells for so the only part under a developer’s control is the cost to build and this is understandably where their focus lies.
According to the World Green Building Council, approximately 40% of the worldwide carbon emissions are attributed to the construction of buildings and the energy needed to run them.
World Business Council for Sustainable Development state that there is a 1% to 12% increase in costs to build green.
The housing market is already fiercely competitive making it difficult for first time buyers to get on the ladder. In the budget we saw the Chancellor announce the introduction of 5% mortgages for first time buyers in a big to help, so a 12% increase in property prices to help enable builders to make the homes they build more sustainable would make purchasing a first time home even more unachievable for many. So should the government subsidise the building of sustainable homes as part of their plan to be carbon neutral by 2050?
It is unlikely that a developer will seek to build in a more environmentally way focusing on their carbon footprint or sustainability of the materials used, whilst having a negative impact on their bottom line, but some will of course.
What is changing is the way we power our homes with a shift to being more energy efficient, with air sourced heat pumps and renewable energy, partially driven by rapidly increasing energy prices over the last few years, but even that needs weighing up with the costs of install or conversion against pay back periods derived from ongoing costs savings.
The government is at least helping drive this change with their revised plan to phase out gas boilers in new homes by 2025 and ban them entirely by 2035.
Furthermore, recent changes to the planning conditions for new developments which came into effect on 12 February 2024, stipulates that any new developments will be required to demonstrate a minimum of a 10% net gain on the Bio Diversity of the existing site.
This will come at a great cost to the developer, further squeezing the margins made on each property and the development overall.
Looking at the wider business world the UK’s Streamlined Energy and Carbon Reporting policy requires companies listed on a public exchange and large organisations to share energy use and carbon emissions information in their annual reports.
An organisation is deemed to be large if they meet two or more of the following criteria:
- A turnover of £36 million or more
- A balance sheet of £18 million or more
- 250 plus employees
According to government statistics SMEs represent 99.9% of the business population in the UK and employ just over 60% of the UK workforce – so are these large organisations publishing information about energy use and carbon emissions going to have an impact on our spending patterns or are we more likely to look at the impact on what is in our pocket?
Full sustainability at present is therefore unlikely to be the most profitable option and would need to be driven by legislation across the board if it were to have a real difference.
It is no doubt something we all grapple with in our day to day lives and a shift in mindset is needed to allow for us to engage and live in a greener world.
If you are a property developer and are thinking about how you can build sustainably and would like to discuss this with Ben, or one of our Property & Construction team, please get in touch by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk
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