Development land value
- Thread starter Jerry
- Start date
- Location
- South Wales UK
Millions most likely.
That’s the thing. I hear all sorts of numbers bandied around but no idea if that’s the case.
I’ve heard it values ranging from £200k to £2m.
Fully understand all land is not equal.
- Location
- South Wales UK
So many variables, densities, social and Affordable mix plus any commercial, public areas schools , infrastructure and sec.106 etc.
Guarantee landowners get minimum compared to end values and profits.
Anything like 50+ houses with a mixture of affordable ones works out between 25-30k a plot in the end. If its a 100+ houses it could be down to 20k a plot
The vast majority of land is sold using a guaranteed minimum price and a firm takes all the risk and does all the leg work. The flatter, larger and easier the site the higher the price. Normally anywere from 150k - 200k per acre minimum and then if their is a suplus after all costs etc then you get a percentage of that to. I have no idea where people get there ideas of millions from per acre!
- Location
- Lincolnshire
There is never any surplus. Big building firms have subsidiary companies for scaffolding, landscaping etc so the headline surplus is nil after they hire themselves a 360 for several times the normal rate.
Goweresque
Member
- Location
- North Wilts
Not only that, what every landowner needs to remember is that once they've signed their option with a developer, the developer is no longer on their side, he's pretty much on the side of the planning authority against the landowner. There's zero incentive for the developer to fight the planners hard on the S106 agreement costs, as the landowner is effectively paying for 85% of whatever the local authority is demanding.
Lets say the council want a new road from A to B, as part of the S106, the cost of which is going to add £50k/acre to the costs of the development. If the developer fight the council hard and gets this road removed from the S106, the developer will get 15% of that £50k/acre, the landowner 85% (on the usual 85/15 split in options). So there's little profit for the developer in getting that cost reduction, most of it will come straight off the land value. And if they give the council what they want, the planning will come through far quicker and they can be on to the next scheme sooner. So there's every incentive to give away the landowners land value down to the minimum price in the contract, in order to keep the council sweet.
Then there's the costings of all the infrastructure - the developer will have years to draw up a costings file the size of a filing cabinet, which will be dumped on the landowner at the time of exercising the option, who then has a few months at best to decide whether the costings are realistic or not. For example the developer might put a road down at costing £Xm when in reality they can get it built for 25% less. That 25% goes straight into their bottom line, and off the landowners. Landowners have at this point been waiting for years for some money and are unwilling to start legal action to contest all this paperwork, and just take the cheque offered by the developer. Its still may be a big number, but even so they've been royally shafted by the sharp suited brigade. Landowners get one chance to sell their land, developers are doing new developments every year.
- Location
- Sedgefield
Make sure you have a good solicitor draw the contract up
No I’m price around £200k/acre
And put a minimum size of development in....
No I’m price around £200k/acre
And put a minimum size of development in....
200k and acre for a large 1800 house development by us , that’s taking into consideration all infrastructure and possibly a school , not looking forward to it being built as most of the houses are 1-2 bed , it will resemble Baghdad in a few years time.
Never sign an option agreement with a developer !!!
if you have land with big development potential seek a promotion agreement with a promoter and get a agent to put that out to tender to find the best promotion deal
A promoter is on the same side as the landowner trying to maximise value and return. A developer with an option is on the other side and will reduce value and landowners return at every opportunity
value depends on what part of the country you are and the site. There are areas where 1mill / ac plus landowner returns are possible
if you have land with big development potential seek a promotion agreement with a promoter and get a agent to put that out to tender to find the best promotion deal
A promoter is on the same side as the landowner trying to maximise value and return. A developer with an option is on the other side and will reduce value and landowners return at every opportunity
value depends on what part of the country you are and the site. There are areas where 1mill / ac plus landowner returns are possible
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There's some farming maths going on here. Good building land is worth millions. Several good family friends are involved within property development they will fight the council's to the last penny over S106 contributions etc. Once large schemes are approved the developers often go back to the councils and have a large percentage of the affordable housing elements etc removed.
Developers have more legal fight in them then the councils at present, who are under pressure to meet new housing targets.
Property development is extremely lucrative, a great number of farmers have become multi millionaires from it.
Developers have more legal fight in them then the councils at present, who are under pressure to meet new housing targets.
Property development is extremely lucrative, a great number of farmers have become multi millionaires from it.
I think it depends on the situation if it's an offlying block of land you wont see then go for max value. We were approached by nearly 20 different companies and after discussing with several which built really nice developments went with one of them. As we can see the proposed site from our yard and house we don't want to look at a load of cheap ugly houses for ever, everyone has different priorities but what I will say is none of these people can really be trusted and are all out for them selves no matter how nice they seam!
- Location
- South Wales UK
Councils hold the cards but no money to fight appeals allegedly?
Councils do not hold the cards, they have to follow policies and case law. In the event an application reaches appeal and is approved the council are liable for costs.
If an individual planning officer does not follow policy, a stage 1 complaint to the council will be lodged, the council have to respond within 28 days or so. If the complaint is upheld it has an adverse impact on the planning officer personally.
- Location
- South Wales UK
Yes maybe .
You got to tell them all they already know to justify your case.
Policies etc etc as stated.
Goweresque
Member
- Location
- North Wilts
Promotional agreements make sense with smaller sites, as the competition among housebuilding firms will be larger when it comes to selling the site with planning permission, as there'll be plenty of potential purchasers. As the size of the project gets bigger however the number of firms capable of affording such a huge amount of money in one go shrinks rapidly. You are left with the potential bidders being one of the half dozen or so large Plc developers. If you think they are going to cut each others throats in a bidding frenzy to pay top dollar you're very much mistaken. They'll let one or two make bids way under the value and then parcel it out to each other afterwards. They all deal with each other all the time, constantly forming partnerships and consortia to enable big developments, they'll happily stitch up Joe Farmer in an instant.
- Location
- South Wales UK
And if social or affordable sites only a few Registered Social Landlords so over a barrel again possibly in different Local Authority areas?
- Location
- Bedfordshire
I think that's why you want a good promoter. They have skin in the game and will only take their percentage about deductions, so it's all in their interest to fight as much as they can. I'm sure their cut would soon equate to the loses and costs from using an agent.
Goweresque
Member
- Location
- North Wilts
The trouble is that as I mentioned above, for the landowner the development is a one off deal. He sells his land, gets his cash, end of story. So he has a massive incentive to get the very best price possible, he gets one bite at the cherry. Whereas all the professionals he may co-operate with, whether developers, land promoters or agents, they all are doing this all the time. There is less incentive for them to get absolute top dollar on any given deal, because there will always be another deal. In fact turnover is better for them. Get deal A done and dusted so deal B can be dealt with a bit quicker.
Its the difference between selling a tractor once and dealing in them. In the former you want the best price, in the latter you just want turnover as fast as possible, as long as each deal turns a profit. Indeed you might have an incentive to sell one for no profit, so you get your working capital back and can reinvest it in a better prospect.
This is why landowners face such a struggle getting full value for their land, everyone else in the process has different priorities to them, even when they are nominally on the same team.