New research has unveiled promising opportunities for UK property investors and developers, with one type of property offering property professionals a potential profit margin of over £350,000. Read on to discover this lucrative property type, which areas provide the highest returns for your investment and the regional variations that could impact this profitability.
The new study by development site sourcing firm Searchland has found that new build properties are selling for twice as much as it costs to build them offering a highly profitable opportunity for developers.
The research, which compared basic building costs in terms of labour and materials to new build prices, found that typical new builds sell for 120.1 per cent more than the price of construction, with construction costing £198,000 and new build prices averaging £436,000. This equates to a profit margin of £238,000.
Regional differences in profitability
According to the research, the South East has the biggest difference between the cost of construction and new build prices. While it costs an average of £219,000 to construct a new property in the South East, the typical selling price for such a property is £533,000, representing a 142.9 per cent markup. This is despite the region having higher than average construction costs of £210 per square foot.
Profit margins in London
London is another noteworthy region where the difference between construction costs and selling prices is significant. The Capital has the highest construction costs in England, averaging £240 per square foot. Despite this, the potential for profit is high. Construction costs in London average £251,000, while the average selling price for new build properties is £608,000, marking a 142.5 per cent increase.
Other profitable regions
Other regions that exhibit a large gap between construction costs and selling prices include the South West, with a 138.8 per cent (£260,784) difference, and the East of England, at 132.8 per cent (£291,263).
Lower margins in the North
The North of England is the only region where the cost of construction is closer to the price of new builds. In the North East, there’s a difference of only 57.8 per cent between the construction cost of £177,497 and the typical new build price of £280,012. Similarly, there’s just a 71.3 per cent gap in Yorkshire and the Humber and a 76.0 per cent divide in the North West.
Has this research made you rethink your development strategy?