When approached by clients with potential development land, our first task is often to select a professional promoter to take the project forward. A land promotion can easily cost hundreds of thousands of pounds, even millions in some cases, and few landowners wish to risk such sums on an uncertain outcome. A promoter will take on the cost of the promotion at risk in exchange for a slice of the sales revenues if a consent can be achieved and the land sold.
But, which promoter to choose? There are hundreds claiming to be the next big thing, but few have both the experience and the finances to make it onto the Robinson & Hall shortlist. Negotiating good terms is an important part of our role but selecting the right partner to work with is arguably the most important decision of all. Much better to achieve a sale at more generous terms to the promoter than to choose the promoter offering the keenest terms only to find that they are unlikely to produce a positive result.
We work with the client’s solicitor and accountant (it is never too early to take tax advice in these matters) to produce a promotion agreement and it is then for the promoter to survey the land, produce masterplans, make representations to all relevant bodies, woo local politicians and planning officers, deal with local objections, overcome technical issues and many other things besides. We remain close to the promoter throughout this period, reporting to the landowner and often having input into design and the handling of local politics. We monitor the many surveys which will be required (ecological, archaeological, landscape impact, highways, ground investigations and many more), ensuring the minimum disruption to farming activities and negotiating compensation where necessary.
Hopefully, usually after some years of input from the promoter and ourselves, we will eventually arrive at the happy day when a planning committee resolves to grant consent for the residential development of the land. Our work is just starting. There is a Section 106 agreement to be agreed and signed, the planning consent must be issued by the local authority and we begin preparations for a sale of the land. Often, we need to commission further work to clarify matters such as archaeology, contamination or ground conditions. We bring all the title, technical and planning documentation together into an online dataroom and we market the land to our database of national and local developers. Our work is not over until a sale contract is signed and it takes great experience to ensure that the best possible price is actually achieved for our landowner clients.
Over the past year or more, residential development land values have been assailed by higher materials prices, higher labour costs, increasing fuel costs, rising interest rates, political turmoil and the covid pandemic. Yet we have continued to achieve rising prices for our land sales. Part of this success comes from the continued strength in the housing market, but part lies in knowing which housebuilders are in greatest need of a new site in any particular area. Our local knowledge is invaluable.
No doubt there are new challenges to the market now upon us. How the market will react in the short term I cannot say at this time. However, in the longer term, the demand for new housing in this region must continue and the opportunities for careful landowners are obvious. Promoters are as keen as ever to secure good sites and the housebuilders know that they need to buy land if they are to continue to build houses.
If you are considering your options and would like to find out how we can help you, then please contact David or Andrew.
Robinson & Hall’s agency teams have in-depth knowledge of a range of property markets across the region.
The sector which has been most active for our teams this year has been the sale of residential development land. Our offices lie in the middle of the Oxford-Cambridge Arc which is a focus for new housebuilding. With easy commuting into London and good transport links to the remainder of the country and internationally, our region is an obvious area for the release of land for housing developments.
Of course, the competition to receive a coveted planning consent is fierce and nothing is won easily. Often sites have to be promoted for years or even decades before a success can be achieved and many will never make it despite the efforts and money which have been sunk into the project. It is a risky business and the development world is inhabited by every variety of shark. It is our job to steer our clients through this dangerous and ever-changing maze.
For more information please contact David Jones.
Autumn drilling is all but over, the clocks have gone back and Christmas songs are playing in the shops. It is the time of year to reflect on the year gone by and to speculate what might be in store for 2022.
The past 12 months have seen a constant fight against the weather, Brexit disruptions, soaring fuel and fertiliser prices and continued uncertainty over what will replace the Basic Payment Scheme. As I write, the 2021 United Nations Climate Change Conference (COP26) is in session which could bring unimagined changes to the way in which we farm, with perhaps the greatest threats in the livestock sector. Tax rates, inflation rates and interest rates must surely rise soon to pay for the unprecedented costs of the pandemic.
On the back of such turbulence, surely many farmers will wish to leave the industry. The market should be awash with land and farms for sale with just a few choosy buyers taking their pick if the price is right.
Nothing could be further from the truth. There is no panic to leave the industry. There has been little land on the market, particularly across central England. If anything, land prices have risen again slightly and the average price for decent arable land might be approaching £10,000 per acre again.
The low supply of land for sale arises from the lack of any pressure from the banks. Farming has been a safe investment for the banking sector with low interest rates and significant asset values. Farmers have used the better years to ensure that borrowings are under control and many now have diversified income, making the farming income less critical. Given all the lifestyle, family and tax advantages of farming, why stop now?
We are also seeing significant money available for investment into farming, largely from development proceeds or from non-farming sources. In difficult times, farmland appears to be a safe investment despite the poor returns. As they say, “nobody is making it anymore”.
Notwithstanding the above, we have seen an enormous range in prices for farmland. Large, fully equipped farms have been in short supply and attract good interest where they are found. However, smaller blocks are very much dependent upon local demand. If the immediate neighbours do not have the funds then some land can become very difficult to sell at any price.
Initial pricing can also be key. A greedy guide price together with unnecessary clawback clauses can kill a sale before it starts, even for a larger serviced block. By the time the pricing is adjusted to a more realistic level, the property will be tainted. The market will assume that there is something wrong with the property.
Frankly, unless interest rates rise, the supply of land will remain limited. We should begin to see more certainty with the new Environmental Land Management scheme and I suspect that much of the oil price spike will dissipate. There will continue to be strong demand from those with the funds and I suspect that the 2022 market will be very similar to 2021. For those looking to exit the industry, the prices and the tax regime will remain favourable. Meanwhile, for those with the funds to buy, there will continue to be good opportunities.
For further information or to discuss your land or farms, please contact David.