The Importance of Market Research
It is a key part of the valuation process but one which is often overlooked and not considered in sufficient detail to maximise Gross Development Value (GDV) and ultimately give developers the best chance of securing new land opportunities. Research typically extends only to a simple overview of new build competitors in the immediate vicinity of a proposed development site whilst ignoring wider market indicators and non-price factors which can provide valuable insight into the potential customer base.
This starts with understanding the area in which the proposed development site is located, the availability of facilities, the quality of schools and the provision of transport links to connect with major towns and cities. When overlaid with basic demographic data into the local people, households and economy, this can provide us with a profile of potential purchasers, their financial position, the type of property they may be looking for and the facilities which may draw them to the location.
It is of course also necessary to understand the competitors in a location, including both current and future new developments as well as the existing local housing stock. In this regard however, it is important to consider that your competitors may not just be those located within a small radius of the site. It is possible that your target purchaser may be considering developments across a wider geography, and this should be informed by the purchaser profile identified through the demographic research.
This is particularly important in areas where there are a limited number of comparable developments, in which case the geography of potential competitors needs to be more carefully considered.
Our Approach
1. The Location This is focussed around understanding the lifestyle that will be offered to prospective purchasers. Where is the site located in relation to key transport infrastructure? Who are the local employers? How good are the schools? What leisure facilities and amenities are on offer in the local area? These are all factors that will influence why purchasers may be drawn to a particular location.
2. Demographics Considered alongside the location factors, assessing the demography of the area in which a site is located helps to build a profile of potential purchasers. This will inform which of the location factors are likely to be most important but also what requirements they are likely to have for a new house. For example, do they work predominantly from home and require space for an office? What is the average household size and therefore how many bedrooms are they likely to require? What is the average household income and what does this mean for affordability?
3. Market Context We look to assess the general trends in the market both locally and nationally to understand average price data and transaction volumes. Perhaps more importantly however, this helps us to assess the price premium currently being achieved for new build property when compared to existing properties.
4. Detailed Assessment of Comparable Data Having established the purchaser profile, location factors and wider market context, we make a more selective assessment of the comparable data, only considering those which we believe relevant to the proposed development. For second-hand properties, what is the condition and is this impacting prices? Are there nuances of the location which for example make one side of the street more desirable than the other? Are the other new build developers delivering a mix that would appeal to the target purchasers or could we deliver greater value with a more suitable product?
5. Recommendations Taking all of the above into account we are able to make recommendations in terms of target market, development mix and pricing. This is accompanied by a written summary of the key factors informing our recommendations but also noting any shortfalls in the data and potential risks in achieving the proposed values.
Our focus in delivering market research is helping our clients to make more informed decisions. It is important to note that it is not an exact science but by carrying out such extensive research, our clients are able to appraise schemes with increased confidence, maximise the value of the site and be more competitive in securing land opportunities.
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