With a growing need for more houses, the economy improving and planning policy relaxing, now could be the perfect time to pursue development opportunities.
Over the last 12 months, the market for development land has transformed. The recovery of the housing market, combined with government pressure to increase housebuilding, means there are now lucrative prospects for owners who can get planning permission for their land.
“The pressure is strong for new housing, but in many instances local authorities are not delivering, or are way behind on doing so,” says Peter Start of Savills Rural. “This doesn’t just drive a rising market for development land, it also provides opportunities to challenge local plans and promote land for residential development that might otherwise be considered premature.”
Savills research shows that across the UK the value of greenfield development land increased by 2.0 per cent in the third quarter of 2014, bringing year-on-year rises to 10.4 per cent – the highest rate of annual price growth for three years. Landowners should be looking at the opportunities that are available to them to profit from this rise. But where should they start?
Andy Redman of Savills Development recommends assembling as much supporting information as possible before promoting a site, but warns that the upfront costs can be significant. “Local authorities face a political battle in earmarking any sites for development, so they won’t take on any more than necessary,” he says. “It is therefore key to establish at an early stage the true opportunity that the land offers.”
“The starting point should be establishing that a site is suitable for development in the first place,” says Andy. “That means commissioning studies into essentials such as utilities, drainage, ecology, highways and services in order to demonstrate that the site will sustain residential development.”
On large schemes, these studies can cost hundreds of thousands of pounds even before the application is submitted, so finding a partner to promote the site mitigates the financial burden. One option is to enter into an agreement with a promoter, who will manage the entire process in conjunction with the landowner in return for a percentage of the eventual sale price. The advantage of this arrangement is that the interests of both parties are aligned, since owner and promoter will want to maximise returns.
Alternatively, an option agreement gives a prospective developer the right to buy the land at a predetermined percentage of market value. The landowner would typically receive some money up front, along with a commitment from the developer to promote the land.
"Values vary significantly. For small conversions, getting the sums right can be critical, and larger projects can take years to come to fruition, so synchronizing plans with the ups and downs of the market is vital"
Smaller schemes are likely to be cheaper and easier to promote, especially since changes to permitted development rights came into force this year. Since April it has been possible to convert agricultural buildings in England to residential use without a planning application. The Local Planning Authority (LPA) still needs to be notified of the proposals, and must appraise them before any conversion works can begin. If the LPA’s comdecision is not given within 56 days, it may be assumed that approval is not necessary and works can commence.
It is too early to assess the effect of these changes, but in easing the process of conversion they should help to alleviate the urgent need for rural housing and open up opportunities for landowners. They will also save money: an application under permitted development incurs a fee of £80, compared with £385 for a full planning application.
“Although these changes are encouraging, taking advantage of them can be complex,” says David Henry, of Savills Planning. “Numerous restrictions apply, and some prior approval of details is needed. Also, carrying out a conversion under the new provision will remove your agricultural permitted development rights for erecting or extending buildings for the next 10 years; constructing any new agricultural buildings will therefore require full planning permission.”
Whether the scheme is large or small, it is vital to have a good understanding of the local property market. “Values vary significantly, even locally,” says David. “So for small conversions, getting the sums right can be critical. Larger projects can take years to come to fruition, so synchronizing plans with the ups and downs of the market is vital.”
Peter Start advises that the best outcomes result from proactive, timely and well planned promotional work. “The current strong market and positive outlook for the next decade will provide many new opportunities,” he says. “Given the long lead-in to securing consents, now is a good time for landowners to be reviewing the development potential of their holdings.”
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