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| Adding value in land and property deals - Property News Midlands |
| Posted on Feb 10, 2008 |
| As planning and development consultants, we act on behalf of both property owners and developers in advising on how best to add value to property and market stability is something that we wish to see. Whilst the sale of new homes from a developer’s perspective may be relatively slow at the present time, land is still required to meet the high demand for new housing stock. What happens in a slower market is that developers are more selective in what opportunities they wish to pursue and profit margins tend to be set at higher levels to balance those perceived risks in the market place. We always find that the right location and the right product will always be in demand if priced accordingly. There is also something to be said for the structure of the deal, for example, developers can be asked to purchaser land unconditionally on the basis of an outline planning consent. Alternatively, they can be offered the opportunity to purchase land subject to obtaining detailed or reserved matters approval. The latter allows the developer to work up a scheme with a product that fits the current market conditions and also allows any other site issues to be verified. This also delays the purchase of the site within an agreed timetable, giving the opportunity for the market to correct itself whilst planning is being pursued. The former is a riskier strategy, as the detail of housing numbers achieved on a site may not be completely satisfied at the time the land is purchased. This method of disposal is certainly one that is prevalent when market conditions are more buoyant and when developers are willing to accept greater risks and potentially lower profit margins as a result. Over the last quarter, we have continued to experience strong demand for subject to planning sales and have yet to personally experience examples where land values have been drastically reduced. We suspect developers to be more cautious in terms of their approach in the first instance. Therefore, we may see a levelling off in terms of land values as opposed to a sharp decline which, we believe, will help stabilise the market as a whole and establish a higher confidence level of buyers throughout the market sector. Further interest cuts will once more improve spending confidence. Commercial property is again very much dependent upon the location and the product, with a number of our clients expressing their view that there remains demand from the owner occupier and rental market. |
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