How to reduce costs as a housing developer

BizAge Interview Team

Given the challenges of the current cost of living crisis, construction companies are living in an era where project costs have never been higher and profit margins seem to be shrinking day by day.

Reducing spending is an essential survival tactic for UK housing developers hoping to avoid financial difficulty, debt and insolvency. Explore the main expenses involved in property development and how to reduce these overheads.

What are the main costs of housing development?

The costs involved in housing development are extremely varied. From employee salaries and construction materials to land purchases and building permits, there are a lot of moving parts that are difficult to balance. In recent years, external factors have also driven up these costs.

Our exit from the EU, exacerbated by the global pause during the pandemic, led to blockages in the supply chains which is increasing the price of goods and causing major project delays. Construction companies have been faced with labour shortages too as many skilled workers returned to Europe, and energy prices have made running essential equipment much more expensive.

Alongside these issues, turbulent inflation, high mortgage rates and a slow-moving market are causing house prices to fall for the first time in decades, further squeezing overall profit.

Thankfully, there are several simple steps that housing developers can take to reduce their spending to help ensure survival until the economic climate improves.

3 ways to reduce costs

  1. Buy in bulk

Building near-identical houses with similar designs? Buy your essential building materials like bricks in bulk from specialist providers. Purchasing your materials in one order will help you to secure the best rate and limit the frustration of supply delays while ensuring excellent quality.

  1. Improve efficiency

When projects drag, you waste money – paying staff who aren’t working, offering conciliatory discounts to buyers and storing equipment and parts. Timely completion of projects is therefore essential to minimising your spending.

Ensure that all legal matters, designs, staffing and materials are in hand before you begin work. Invoice early, taking a downpayment deposit where appropriate to aid a healthy cash flow. It might also be beneficial to hire a site manager for each project who can ensure work is being completed to the schedule.

  1. Choose the right sites

Before committing to sites, make sure to do your research:

  • Is there a demand for properties in the area?
  • Is the land in a good part of the area?
  • Are the conditions good for construction?
  • Can you obtain the permit?
  • Will there be any resistance to you building a housing development here?

Choosing sites that are in contention or are found to be unfit for use will waste both time and money.

Written by
BizAge Interview Team
March 26, 2024