The most important consideration in the delivery of housing into the market is absorption rates and control of the amount of development in progress to avoid having large amounts of unsold stock. Understanding absorption rates is fundamental to successful development for market sale and rent, with wide variations amongst markets in the speed at which homes can be sold or let at any price point. One way of increasing absorption is diversification of tenures, which housing associations are well placed to do.
In the sales market, appropriate pricing is essential to optimise the size of the target market and thereby optimise sales rate. When buying a house, key considerations for consumers include how many bedrooms it has and how much it costs. Size in square feet and value per square foot are less crucial for the buyer, although they are important for the developer.
In order to deal with this, many private housebuilders target the unit prices that secure the greatest volume of demand, whilst maximising value per square foot. Often this means reducing unit sizes, but maintaining a number of bedrooms appropriate to the unit value. Housing associations will need to adapt their product to suit the market, subject to local space standards where they apply, if they are successfully to deliver new homes at volume into the private sale market and be competitive in the land market.
The most significant risk to private housing developers is being caught out by a downturn, following significant land acquisition or with large amounts of development in progress. One advantage housing associations have, compared to private housebuilders, is the flexibility to switch new homes between tenures if, in a downturn, the sales market contracts.
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