Value of Building Land
Discussion
It's not that simple. Firstly you have to know what type of construction the LA will allow in that area. E.g. if they'll allow a dense development of flats you'll get more dwellings than if they specify family houses only.
Speak to your local planning office and get a copy of their local development plan. Requirements for affordable housing are on the increase too. In my area for example, they have just moved the 25% minimum from developments with 10 or more units to developments with 4 or more units.
Speak to your local planning office and get a copy of their local development plan. Requirements for affordable housing are on the increase too. In my area for example, they have just moved the 25% minimum from developments with 10 or more units to developments with 4 or more units.
To build in most villages now requires you to pay a gratuity to the LA, also if the development has over a certain amount of houses/flats a percentage of them has to be designated for low cost housing or housing association.This can all have an effect on the land value.
Edited by saleen836 on Sunday 7th June 11:23
G Man: Contact me via my profile.
If you're in Oxford, you're in our patch and my Region of a major national housebuilder is actively looking to buy land at the moment. If it looks like a goer I'll put you in touch with one of our land buyers, who will work out what it's worth.
As others have explained, there's no set 'value'. We do a 'feasibility' which involves me preparing a sketch layout for the development, then with input from various other disciplines (anticipated sales values, planning costs, engineering costs for groundworks and infrastructure), we work out what the land is worth to us. In simple terms, we add up the predicted total build cost, add a percentage profit margin, then subtract that figure from the total estimated sales revenue... what's left over is the land value that we would offer to the landowner.
The 'gratuities to Local Authority' (otherwise known as Section 106 contributions) mentioned by Saleen can be negotiated, incidentally, so it can make a big difference having someone on board who knows their way through the Planning system. Local Authorities will usually come up with a huge shopping list of S106 contributions and plenty of more naive developers think they have no alternative but to agree to everything, which is quite definitely not the case.
If you're in Oxford, you're in our patch and my Region of a major national housebuilder is actively looking to buy land at the moment. If it looks like a goer I'll put you in touch with one of our land buyers, who will work out what it's worth.
As others have explained, there's no set 'value'. We do a 'feasibility' which involves me preparing a sketch layout for the development, then with input from various other disciplines (anticipated sales values, planning costs, engineering costs for groundworks and infrastructure), we work out what the land is worth to us. In simple terms, we add up the predicted total build cost, add a percentage profit margin, then subtract that figure from the total estimated sales revenue... what's left over is the land value that we would offer to the landowner.
The 'gratuities to Local Authority' (otherwise known as Section 106 contributions) mentioned by Saleen can be negotiated, incidentally, so it can make a big difference having someone on board who knows their way through the Planning system. Local Authorities will usually come up with a huge shopping list of S106 contributions and plenty of more naive developers think they have no alternative but to agree to everything, which is quite definitely not the case.
Sam68 speaks wise words. If your 4 1/2 acres has any chance at planning a) it's going to be too big for many developers to consider (in terms of units) and b) it's going to take a bucketload of money to get a full consent on your site. You wouldn't believe the amount of work it takes to make a major application these days. Some councils charge £1,250 just to have a pre-planning application meeting with you. You've got all the consultants reports to produce (traffic, ecology etc, etc) never mind the 4 sets of drawings of your proposed scheme (at a1 or a3). It all adds up.
It's worth speaking to him just so that his firm can check out if your land has any chance of gaining a planning consent in the first place.
He's right about S106 agreements too.
There are very few developers in the market at the moment with the ability to purchase land, even if it has a consent. There are some 2nd tier RSL's out there buying but many of the bigger players have shot their bolt too.
If Sam comes back to you and says it's got no chance in the short to medium term (1 to 5 years) then I've got 2 firms looking for Strategic opportunities across the UK.
It's worth speaking to him just so that his firm can check out if your land has any chance of gaining a planning consent in the first place.
He's right about S106 agreements too.
There are very few developers in the market at the moment with the ability to purchase land, even if it has a consent. There are some 2nd tier RSL's out there buying but many of the bigger players have shot their bolt too.
If Sam comes back to you and says it's got no chance in the short to medium term (1 to 5 years) then I've got 2 firms looking for Strategic opportunities across the UK.
As has been said, there are so many factors involved that it is impossible to place a value on it from the deatils given, however £1m/acre used to be the figure that got banded about (pre-economic crisis), but before the £ signs start appearing in your eyes, bear in mind all of the sensible info given above.
Still, not a bad situation for you and your neighbour to be in....
Still, not a bad situation for you and your neighbour to be in....
monthefish said:
...however £1m/acre used to be the figure that got banded about (pre-economic crisis.
Divide that by at least 2, these days, in most cases. Some of the sites we were looking at in the boom years are coming up with negative land values at the moment (where there's a lot of remediation or enabling works to be done, for example).But there are other ways of structuring a deal. Unless you are desperate for the cash, I wouldn't suggest to anyone that they simply sell for a fixed sum at current land values, but, for instance, it's possible to do a deal so that you get a lump sum on the developer gaining planning permission, then a percentage payment with each house built, that is tied to actual sales prices. That way - bearing in mind that any half decent site takes at least a couple of years to go from pre-acquisition through Planning to commencement, these days - there's a good chance that the market will have gone some way to recovering before the value of the land is realised, and your best interests are tied to the developer's.
bean455 said:
Hi,if anyone can help, I have at my disposal over 400 acres in Oxford, just got the go ahead from the land Owner to sell it.Any thoughts?
If that's all suitable for residential development, then there's nobody in a position to buy that amount of land outright as a single developer, at the moment. If it's viable in Planning terms, I'm sure we'd be interested in a Strategic partnership, though, to aid it through Planning, develop some parcels ourselves and help negotiate the sale of other parcels to other developers. If you're serious (and I have to say that I'm surprised you haven't been courted by major developers for many years, if it stands the slightest chance of getting Planning permission), then e-mail me via my profile with further details... we're always happy to talk!Sam_68 said:
monthefish said:
...however £1m/acre used to be the figure that got banded about (pre-economic crisis.
Divide that by at least 2, these days, in most cases. Some of the sites we were looking at in the boom years are coming up with negative land values at the moment (where there's a lot of remediation or enabling works to be done, for example).1 acre = 4046m2 = 15 plots of 375m2. (a 375m2 plot will easily accomodate a detached house of footprint 9x8m)
£1m/15 = £67k per plot.
I think a non-problematic site, in an area where the local autority aren't too demanding when it comes to S106's, £67k for land would still be achieveable, especially for a developer doing the site as a job-lot who benefits from huge economies of scale wrt infrastructure etc. Assuming the end value of the house was somewhere north of £300k (which should be achieveable for a nice detached house in Oxford)
If the 'professionals' disagree - OP - PM me and I'll consider making you an offer.
monthefish said:
Sam_68 said:
monthefish said:
...however £1m/acre used to be the figure that got banded about (pre-economic crisis.
Divide that by at least 2, these days, in most cases. Some of the sites we were looking at in the boom years are coming up with negative land values at the moment (where there's a lot of remediation or enabling works to be done, for example).1 acre = 4046m2 = 15 plots of 375m2. (a 375m2 plot will easily accomodate a detached house of footprint 9x8m)
£1m/15 = £67k per plot.
I think a non-problematic site, in an area where the local autority aren't too demanding when it comes to S106's, £67k for land would still be achieveable, especially for a developer doing the site as a job-lot who benefits from huge economies of scale wrt infrastructure etc. Assuming the end value of the house was somewhere north of £300k (which should be achieveable for a nice detached house in Oxford)
If the 'professionals' disagree - OP - PM me and I'll consider making you an offer.
V8mate said:
monthefish said:
Sam_68 said:
monthefish said:
...however £1m/acre used to be the figure that got banded about (pre-economic crisis.
Divide that by at least 2, these days, in most cases. Some of the sites we were looking at in the boom years are coming up with negative land values at the moment (where there's a lot of remediation or enabling works to be done, for example).1 acre = 4046m2 = 15 plots of 375m2. (a 375m2 plot will easily accomodate a detached house of footprint 9x8m)
£1m/15 = £67k per plot.
I think a non-problematic site, in an area where the local autority aren't too demanding when it comes to S106's, £67k for land would still be achieveable, especially for a developer doing the site as a job-lot who benefits from huge economies of scale wrt infrastructure etc. Assuming the end value of the house was somewhere north of £300k (which should be achieveable for a nice detached house in Oxford)
If the 'professionals' disagree - OP - PM me and I'll consider making you an offer.
monthefish said:
You're absolutely right, but I think it could still be made to work at £67k/plot.
I'm not going to copy you one of our viability spreadsheets, or even tell you how we do them, as that would be too commercially sensitive, but lets say you work on a coverage of 15,000 ft2 per acre developable area (ie. excluding public open space, land for SUDS, etc.) - which is realistic in a market where you can't give away apartments or 3-storey houses.Say developable area = 80% of gross site area (it obviously varies from site to site), so your gross coverage is 12,000ft2 per acre.
Lets call sales revenue £180 per square foot... so you have a sales revenue of 12,000 x £180 = £2.16 million per acre.
Subtract your land value of £1 million per acre and you're left with £1.16 million.
Out of which you have to take:
- Profit margin; you'd be nuts to work on a margin of less than 25% in the current market, so your £1.16 million has just become £870K.
- Basic Build cost. I'm not telling you what ours is, but lets say £60/ft2 = £720,000
Then you have:
- Infrastructure costs (roads, drainage, groundworks, services)
- Consultants fees
- Prelims
- Section 106 contributions
- Marketing costs
- Legal costs
- Interest on any finance
- Commuted sums & interest on bonds for road adoptions.
- Contingencies
Still think £1 million per acre is a good rule of thumb for land value?
eta: To the OP: if Monthefish is willing to give you £4.5 million for the site as an unconditional offer, bite his hand off, right now!!
Edited by Sam_68 on Wednesday 10th June 12:52
G Man said:
monthefish said:
Sam_68 said:
Still think £1 million per acre is a good rule of thumb for land value?
Yes.I am right as this is my house its tax free
If you had 4.5 acres there's a very real potential that the council would seek to put affordable homes on there as part of a developement. They might do you for under-development of the land if you simply went for 2 or 3 houses on that land you're talking about.
They might/might not; I am just pointing it out.
You could always argue that affordable isn't appropriate for the area but if the local borough are short of units they might (big might) hammer you for social housing.
They might/might not; I am just pointing it out.
You could always argue that affordable isn't appropriate for the area but if the local borough are short of units they might (big might) hammer you for social housing.
Oi_Oi_Savaloy said:
If you had 4.5 acres there's a very real potential that the council would seek to put affordable homes on there as part of a developement. They might do you for under-development of the land if you simply went for 2 or 3 houses on that land you're talking about.
They might/might not; I am just pointing it out.
You could always argue that affordable isn't appropriate for the area but if the local borough are short of units they might (big might) hammer you for social housing.
reminds me of a new build that we (thankfully (sorry!)) didn;t buy a few weeks back. could have got it for a very good price but as i said once we'd decided against.. if they hadn't build the cheapo houses they could have actually sold me the house because they could have given it a proper garage with proper parking and a proper front garden! i do have some sympathy for the house builders because it's a bit of a joke! mind you the riddiculously obvious designed to a price plumbing system was also a put-off... why design a house that puts the utility at the back and the dining area in the dingy end of a kitchen just so you don't need as much plumbing. flipping daft!They might/might not; I am just pointing it out.
You could always argue that affordable isn't appropriate for the area but if the local borough are short of units they might (big might) hammer you for social housing.
Oi_Oi_Savaloy said:
If you had 4.5 acres there's a very real potential that the council would seek to put affordable homes on there as part of a developement. They might do you for under-development of the land if you simply went for 2 or 3 houses on that land you're talking about.
They might/might not; I am just pointing it out.
You could always argue that affordable isn't appropriate for the area but if the local borough are short of units they might (big might) hammer you for social housing.
Don't think so being in a village the access is limited, ie a lane off the village high st so the number of houses is going to be limited, I think 20 maxThey might/might not; I am just pointing it out.
You could always argue that affordable isn't appropriate for the area but if the local borough are short of units they might (big might) hammer you for social housing.
gman said:
OK Monthefish yours for £5M , 4.5 acres of land 2 X £1/2mill detached house. The neighbour and me are gone
I am right as this is my house its tax free
Normally only land of up to an acre qualifies for Principle Private Residence relief and is effectively tax free when sold together with the house. There can be some exceptions so worthwhile getting some good tax adviceI am right as this is my house its tax free
G Man said:
Oi_Oi_Savaloy said:
If you had 4.5 acres there's a very real potential that the council would seek to put affordable homes on there as part of a developement. They might do you for under-development of the land if you simply went for 2 or 3 houses on that land you're talking about.
They might/might not; I am just pointing it out.
Don't think so being in a village the access is limited, ie a lane off the village high st so the number of houses is going to be limited, I think 20 maxThey might/might not; I am just pointing it out.
If the development potential is limited by access, there's a good chance they'll simply use that in conjunction with PPS3 as an excuse for refusing the application altogether.... or whack you with a huge S106/Section 278 agreement to undertake off-site highway improvements to facilitate the development.
And in Oxfordshire, there's more than a potential they'll ask you to put affordable on there. Expect to be asked to provide 35 or 40% of the houses as affordable (depending on which LPA it falls under), probably with 'extras' like Lifetime Homes and/or renewable energy in addition. Oh, and don't forget that to get grant funding for affordable housing (which they'll kindly buy off you for slightly less than it cost you to build them), the RSL's will require Code for Sustainable Homes Level 3 compliance, which adds between £6-£9k per house to the normal build costs.
Costs of promoting a sensitive, non-allocated site through the Planning process can easily rack up to a six-figure sum (excluding the actual application fees), too, so if you're considering taking it to Planning yourself, make sure you know what you're letting yourself in for.
Edited by Sam_68 on Wednesday 10th June 19:19
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