.localhost Domains

We add a real actual DNS record for the local. subdomain pointing to 127.0.0.1

It works really well and means no setup on our developers machines

Can you expand on this? you redirect *.local.example.com to 127.0.0.1, and then how do you setup the local machine so that eg myservice.local.example.com hits the correct port? I guess you still need a proxy somewhere? or you specify eg myservice.local.example.com:3000 ?

It's not a redirect. It's an actual A record on the domain for local.example.com -> 127.0.0.1

Then we just have an entry for local.example.com in our vhosts and bam everything works as expected. No need to mess with /etc/hosts