Property developers are always looking for ways to increase their portfolio and, subsequently, boost their income. One of the easiest ways to do this is by adding basements to their developments.
The property development market has been slow and steady over the last couple of years. Planning consents dropped by 28 per cent between the fourth quarter in 2024 compared with 2021, according to the House Building Federation.
London, in particular, has faced a challenging market, with increased building costs and a reduced demand for properties for sale.
Therefore, developers are looking for any way they can boost their finances at the lowest cost to themselves.
Building basements on their development projects is a solid idea, as it allows them to add more properties to rent or sell without the financial outlay of an entirely new project.
According to a 2021 report, there is a luxury basement phenomenon in London, attracting high-end buyers who want an asset in some of the city’s most affluent areas.
It revealed that in 2015, every $1,000 (£749) invested in a basement development in central London would result in an increase in value of the property by $2,000. Therefore, it is easy to see how profitable this is to property developers.
While the idea of building a basement on a development is very tempting, it is important that investors consider the practical implications first.
It involves extensive planning, structural alterations, excavation, work on the foundations, hardwiring, plumbing, underpinning, and waterproofing. Developers will need planning consent, architectural advice, and a specialist concrete contractor to carry out the work.
This will also take a lot of financial planning for the developer, so they can determine whether the investment is worth the extra rent or increase in value of their asset.
According to the Homeowners Association, building a basement can add 20 per cent to the asking price of a property. However, this will depend on the size of the development, and the spec it is completed to.
For large-scale developments, basements could create individual flats that can be sold or let out separately, which will provide a valuable extra income for the company.
