Debunking Urban Myths
It is a well-publicised Daily Mail urban myth, that the land market is being “controlled” or somehow “restricted” by housebuilders (public or private) for their own benefit. Many would also believe that housebuilders have acres and acres of unit numbers in their possession; this is simply not the case. Most developers operate very much on hand-to-mouth basis and at least in the current market conditions, developable residential land is at a premium.
Having said that, builders tend to be their own worst enemy, quoting the number of units and land area under control, usually within their financial statement to shareholders. In reality, many of these units are held on long-term options and many of these units are making their slow and steady (and also expensive) way through an increasingly complex and demanding planning system. In the meantime, the UK continues to suffer from an economy-limiting amount of new housing stock. This trend has been the case since World War II – which in turn has implications for house prices. While this outlines the problem, it doesn’t offer any solution (assuming the government does not radically change its planning strategy).
The Real Reason for Housing Blockage (To Sell or Not to Sell….?)
Here at Northern Land Agency, we think one reason for the blockage is firstly due to landowners that do not want to sell! I’ll correct that: they like the idea of selling but what they don’t like the idea of is the potential tax bill after the sale has completed and secondly the fact that they have got nothing left to sell!
It’s an all-or-nothing scenario which leaves some landowners very reluctant to dispose of any residential development land at all. Is this the best time to sell? Will values continue to rise? Have I selected the preferred development partner? Will I get any overage? When’s the next crash coming? Classic sale anxiety.
Most public and quasi-public sector bodies suffer from this form of anxiety to a greater or lesser extent, but it is also apparent in the case with many private bodies and family trusts. And it’s ok. It’s totally natural!
The Solution……Homes for Land – All Interests Aligned
Northern Land Agency have created an innovative approach to alleviating this anxiety and it lies in the form of a “Units for Land Deal”. With several PRS and alternative delivery operators and contractors entering the suburban housing market, there is a real opportunity for landowners to take units, in lieu of land value. The troublesome issue of management can be dealt with in an arrangement with the PRS operators’ in-house function. From the Developer point of view a massive increase in return on capital employed (and show me a developer who doesn’t have at least one eye on this KPI!).
So at a stroke you’ve moved from a lumpy, tax-heavy, one-off transaction, into a steady, long term income stream, which is always a joy from a legacy point of view. Everyone’s interests are aligned. We are working on several such deals and if you want to chat through this opportunity and how you can create an income stream out of a land asset, just give us a call.
We’d love to talk. Whenever you’re ready, simply contact us…
Steven Verity, Director – steven@northernlandagency.co.uk
John Dunlop, Director – john@northernlandagency.co.uk