Stepping Up Your Property Game

John Howard is Managing Director at Ipswich Wharf Developments Ltd and Fine and Country Estate Agents. In this article, he talks about the opportunity of developing brownfield sites into residential homes.

John Howard is one of the most experienced property developers and investors in the UK today, with nearly four decades of experience in the industry. John’s proficiency stems from the sale and purchase of almost 4,000 houses, apartments and developments within the UK.

With a rental portfolio similar to many investors’ through his property companies, John’s experience is vast, from buying traditional houses, to hotels and large scheme developments.

One of the recent acquisitions in John’s portfolio is a £26 million development funded by Homes England, although a unique distinction between John and many large developers is his passion and drive for small deals and developments.

His fervour for advising and helping less experienced property developers and investors has led him to launch the John Howard Joint Venture Fund, where he co-invests with other property developers and offers his own guidance and mentorship.

John is a director and shareholder of numerous estate agencies including Fine and Country Norfolk, property management companies and financial service providers which provide an all-encompassing understanding of the property world. At just 25 years of age, John also became one of the youngest directors of a football league club when joining Cambridge United FC, where he stayed for 18 years. John and his business partners purchased Auction House in 2009, which was grown significantly before selling the shares in 2018.

The knowledge that John has gained throughout his career is now being passed on through his books, property seminars and TV appearances. John co-produces both Property Elevator and Property Graduate on Property TV on Sky. 

Stepping Up Your Property Game

A buy to let investment is the most common way for people to dip their toe into the property market. And as I’ve said many times, it is a sensible way to start… if slightly boring. If you’re of a cautious nature and have funds to invest into another property, then it may well be the right strategy. 

However, for those of us without spare cash, we need to step up our game. There are a few ways this can be done. One is purchasing commercial property and utilising the permitted development rights to convert to residential. However, the secret is out on this – I and many others have been doing this for almost 40 years. And I’m always looking for new ways to make money from my property dealings. I, like many experienced property developers, try to keep one step ahead of the crowd, and when others catch up then we move onto a different strategy.

It is also worth saying that there is nothing new in property, just the next great opportunity. 

Commercial developers have been purchasing brownfield sites for commercial schemes for many years. However, there is now a real opportunity to take brownfield sites to develop for residential homes.

‘Taking crumbs from a rich man’s table’ is very appropriate when it comes to property developing. Every developer that builds less than 500 houses per year is considered small, with the top 10 housebuilders controlling approximately 65% of the new build housing market. Luckily for us, these big players are far more risk averse, giving us the opportunity to get involved and snatch some crumbs. The risk really is where the reward is.

The opportunity here is to purchase sites and redundant buildings with no planning and sell them on to these much larger companies subject to planning. The larger housebuilders are happy to invest in the planning process and take the risk of not obtaining permission. However, you can be confident that if they are willing to spend any money on a planning application, they are fairly assured planning will be granted.

You must appreciate that these large housebuilders are churning out houses of similar design, and just need more space to put them on. They need sites that allow them to get building immediately. Their overheads are such that if they have any delays in production, it will affect their bottom line dramatically. It is very much like a factory production line.

So, brownfield developments are becoming increasingly popular with the larger housebuilders. Sites that have previously been developed and now lay redundant are high on the Government’s housing agenda. Building on brownfield sites reduces the need to take up our green and pleasant land with more urban sprawl.

It has taken some time for the Government to recognise this, but they have now made it easier to obtain residential permission. 

Last year I met with the then Housing Secretary of State, Robert Jenrick. I showed him the site that we sold on (subject to planning) to McCarthy and Stone, one of the retirement village developers. I explained that I felt something needed doing to subsidise the cost of the archaeological dig. A dig of this kind must be carried out on many of those sites, particularly those in the town and city centres. And without some type of subsidy, this land is often left vacant, or even worthless.

When my joint venture partner, Stephen Clarke, and I sold this site we faced several challenges. 

The site was originally owned by the Archant Group, a newspaper and magazine publisher, and consisted of an office building from the mid-‘60s and a printing works. 

One of the main hurdles we faced was it being close to the gardens of Thomas Wolsey, the famed Archbishop of Canterbury, as well as being in the town centre of one of England’s oldest towns. This meant that an archaeological dig would be required, something we allowed £500,000 for. And before we even purchased the site, we spent £40,000 on some trial trenches where nothing of historical importance was found, leaving us hopeful that we wouldn’t need the full half a million. However, an archaeological dig is a little like putting an alcoholic in charge of a pub – by which I mean there are few constraints on costs or time.

What is arguably even more frustrating is that even if something is found, the findings are marked and recovered for future generations to find. 

Nine months and £490,000 later, very little had been found other than the Saxon path and a bone chiselled into an ice skate. And, whilst it’s nice to be accurate on costing, we were of course optimistic that the final bill would come in at a little less!

The next challenge was to demolish the existing buildings, for which we had a fixed price of £340,000. This was duly carried out only to discover that there was another demolished building underneath, which was full of asbestos. The costing of getting rid of the asbestos was £320,000. 

These challenges come at a huge risk and cost to the landowner, allowing developers and investors to purchase the sites at very low prices, clean them up and resell them to the big national housebuilders.

Until the government subsidises the cost of the archaeological dig and clean-up, there will always be opportunities for small developers to do the job and pass them on. There are two profit centres here: (1) cleaning up the site and (2) allowing the buyer to purchase subject to planning, which under the brownfield planning initiative they are sure to get.

So, if you began your journey with a buy to let, moved on with commercial to residential, maybe it’s time for the next big thing. And remember, risk equals reward.