A set of figures in Octane Capital's research is worth stopping on. Of the English new-build listings they analysed, 13% had been on the market for more than six months and 4% for over a year, yet only 14.5% had taken any asking price reduction at all.
The first reaction is usually that developers are being stubborn. They aren't. Every discount comes straight out of a margin already eaten by build costs, and holding for another quarter often costs less than cutting. At scheme level it is a rational choice.
It starts much earlier than that.
On a small development or refurbishment, almost all the effort in the appraisal goes into the sale price. Comparables pulled, conservative assumptions, exit checked twice. Then the timing assumption is simply dropped in. It'll sell in three months, because the last one did.
That assumption doesn't survive contact with the data. On Propalt, our property data platform, only 22% of the homes listed nationally in March went under offer within 30 days, and only 38% within 90. Flats are lower again at 28.6% inside 90 days. Selling in three months is the minority case.
And sold subject to contract is not the end of it. From sale agreed to Land Registry completion runs to 125 days nationally, and 149 for flats. Put the two stages together and a typical transaction takes something over six months from listing to money in the account.
Time is the assumption that does the damage, because it never presents itself as a loss. It shows up as finance cost, as an extension fee, as capital sitting in a finished scheme instead of going into the next one. By the time it becomes visible, your options have narrowed to accepting the discount you were trying to avoid.
The fix is dull. Before you commit, find out how long comparable stock in that specific location actually took to go under offer, rather than what it eventually sold for. Underwrite to that number with room on top, and make sure the funding runs past your best case rather than up to it.
Cheap capital forgives a slow exit. Expensive capital doesn't, and most development finance available right now is the second kind.
Co-founder of Propalt and a property investor and developer for 20 years
