Developer predicts silver lining to credit crunch

Edited by the Buildingtalk editorial team Jul 29, 2008

Residential specialist Investland predicts that next 18 months could see a property market dominated by niche, locally-focused companies.

As the property market spirals in the wake of the credit crunch, many larger property developers continue to struggle, especially listed companies.

However, a prominent London developer has predicted that the next 18 months could see a property market dominated by niche, locally-focused companies.

Residential specialist Investland was set up during the economic downturn of the early 1990s and now sees many of the same conditions being recreated that saw them enjoy rapid growth.

In the early 1990s, a number of factors came together to create the ideal conditions for smaller scale developers, including:.

Key drivers behind the age of the niche housebuilder.

1 - No share holders to have to report to, so bigger risks can be taken.

2 - Local knowledge, contacts and reputation mean they are more able to spot the best opportunities in a depressed market.

3 - Ability to enter deals and buy and sell properties very quickly and with a lot of flexibility.

4 - Able to continually prove liquidity through a number of small scale deals (in contrast to the big developers that may completely exit the market for months on end).

5 - Personal relationships with key investors, so not overly dependent on the banks to get projects off the ground.

Yuda Ambalo, managing director of Investland, comments: "The current market conditions have been very testing for a number of developers".

"Understandably, many of the bigger players are stepping back from the market entirely".

"A lot of industry sources are even predicting further falls, and so we could see the big-money end of the market continue to be quiet for some time".

""What we learnt from our experience at the start of the 1990s was to take exactly the opposite position.

If you're out of the market, you very quickly lose your reputation and confidence to take risks.

The current conditions - challenging as they are - are perfect for local, niche developers that are quick on their toes and know their markets very well".

""The end result is that developers like us will keep the market ticking along whilst these conditions continue".

"When the bigger players come back, they could very well end up buying a lot of the projects they're missing out on now, with the niche developer capitalizing on any planning work they've achieved on the sites in the meantime Ben Chesterfield, managing director of Urban Edge, comments: "The current market makes for a depressing picture for a lot of the large developers, but there are silver linings to be seen if you look hard enough".

"A lot of developers that have put effort into specific regions or niche types of housing have a huge opportunity to be the main driving force behind the industry".

"If everyone takes a big step back, they're leaving a void which has to be filled by someone - to my mind, that someone is the niche housebuilder.".