Key Changes for Property Developers in 2022

Key Changes for Property Developers in 2022


2021 had its ups and downs with COVID 19 continuing to dominate the streets and the emergence of the Omicron strain. 

While there were no significant changes within the property development world, here’s what developers can expect in 2022.

  1. New Residential Property Developer Tax (RPDT)

Residential Property Developer Tax (RPDT) is to apply from 1st April 2022 and requires residential property developers to pay an additional tax to fund the cost of remediating unsafe cladding in high-rise buildings.

The rate of RPDT has been set at 4% so that the government can hit its revenue-raising targets of £2bn of revenue over a 10-year period. 

RPDT will apply to companies or groups of companies undertaking UK residential property development with annual profits in excess of £25 million. Property investors (including those using a build-to-rent model) are excluded.

There is still uncertainty on how the tax will be applied, but hopefully, further guidance from the H.M. Revenue will be provided.

Read more about the changes to RPDT here.

  1. The Cost of Building Materials

The price of building materials increased drastically in 2021 due to short supply and high demand. Many property developers had no choice but to pay for building materials at high costs while some projects were sadly unable to be completed.

So, what do we expect in 2022?

Most professionals predict that the price of some construction materials such as bricks, concrete and cement will not fall significantly until mid-2022 with the price of steel and timber highly likely to settle down earlier, presumably by the end of March 2022.

And according to Construction News, construction material prices have stayed flat for the first time since September 2020.

How 2022 unfolds will highly depend on the suppliers’ ability to rebuild inventories and the market is still some way off ‘normality’ as Brexit, HGV driver shortages and Covid-19 disruption continue to affect supply and demand, as well as labour availability.

  1. Progress on Residential Leasehold Reforms

The Leasehold Reform (Ground Rent Bill), is set to become law in the early months of 2022 and aims at making leasehold ownership fair by restricting ground rents of flats and houses in new long leases.

Breaching this law can result in a fine of up to £30,000. Retirement home leases are also set to be included in these restrictions, but that will take place later next year (2023).

However, the Ground Rent Bill will not apply to new leases granted under contracts made before the new law is implemented and will also not apply to existing leases.

In 2022, we definitely expect to see more substantive reforms. For instance, an introduction of draft legislation for changes to the existing law on leasehold extensions.

  1. The Continuation of Permitted Development Rights (P.D.R.)

The Permitted Development Rights were reinvented in 2015 to provide a shortcut through the planning system which allows property developers to extend, renovate or change the use of buildings without having to submit a full planning application.

While P.D.R’s were once quite problematic, we expect more efforts this year to ensure the continuation of these rights.

Considering that there are so many unused brownfield stocks, P.D.R’s will be used to convert commercial property into residential ones in order to recycle property and construct more homes across UK town centres.

However, local authorities can designate areas where permitted development rights are restricted under Article 4 of the legislation. Given this, it is vital developers are aware of any restrictions before committing to a project.

  1. Expect More Planning Reforms

The Planning Bill is due to go before parliament this spring, having been delayed in 2021. The last significant update to the planning system occurred in 1947 and the Planning Bill is designed to replace this legislation in order to speed up the planning process and meet the governments target of building 300,000 new homes each year.

The Bill is likely to comprise several key areas to create what the government says will be a more streamlined planning process. These could include:

  • A digital planning system
  • Scrapping section 106
  • Street referendums on developments
  • Brownfield site investment
Do these changes affect your property development strategy for the year ahead? Whether you need finance to fund your next deal or you’re looking for your next opportunity - our team has over 40 years of experience in property investment, development and finance. 

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