The rise of the land promoter has been a good thing for farmers and landowners across the UK but whilst this holds true for the largest, most well-established and funded promoters, what about the raft of smaller companies that have sprung up ?
The danger here lies in the actual agreement itself as should the land promoter fail then it is worth bearing in mind the landowner may well have signed-up to perhaps a 5 or 10 year (or the ever popular '5y+5yr+5yr' land promotion agreement) period and as such if the land promoter goes into bankruptcy then what are the legal implications for whether the deal can be transferred ?
The Option Agreement does not have this problem and is of course usually taken out with a large, well funded plc housebuilder.
But with the potential ahead for economic problems in the UK, should unemployment rise significantly and / interest rates climb then house sales will suffer and the housebuilders will reduce their need for buying land from land promoters - can smaller land promoters really carry the cost of perhaps several large planning applications with no realistic end sale result in sight ?
If you are concerned about entering into a land promotion agreement or an option agreement with a land promoter or house builder and selling your land in this manner then do call John or Marianne at Landsite (www.landsite.co.uk) on 07971 389985 0r 01527 328401 and firstname.lastname@example.org.
Given that farmland prices in 2020 only grew by a small percentage to stand at £6,690 per acre by the end of 2020 (see https://www.savills.co.uk/property-values/rural-land-values.aspx) and we have a national borrowing of over two trillion pounds (January 2021) it is important to look at where residential and other land values may be going in 2021 and beyond.
Residential Land Values - 2021
Residential land values for land with planning have remained steady during 2020 and will in all likelihood increase towards the end of 2021 as a greater number of housebuilders and developers at last find confidence in securing new sites to build out so Landsite estimates that prices could climb by 5% to 10% by the end of 2021.
Roughly speaking, land values are now :
January 2021 – residential development land - £1M to £1.2M+ in and around the Home Counties falling to as little as £400,000 to £500,000 per acre in pooper provinces. A good ‘average’ value is around £650,000 per acre across the UK.
You will get slightly more using the ‘land promotion’ route as the land is sold on the open market with the added financial benefit of a planning permission – this could be as much as 10% to 20% more. See Selling Land - FAQ's for more information.
Land Promoters – 2021 and Beyond
Regarding deals with land promoters, we see this as continuing apace and the market still sees new companies coming into it. Farmers and landowners need to tread relatively carefully if they are looking to get into agreements with under-capitalised firms as if any economic recession hit then they could find such companies may struggle to properly service the costs of land promotion or, worse case, go bust. In that respect, on larger sites (and dependent upon where we are in the economic cycle) it may be more prudent to work with a large, well-funded plc housebuilder. See the Land Promoters & Developers Federation (LPDF) for more information : https://lpdf.co.uk/.
Logistics – Huge new demand following Coronavirus
There is undoubtedly a huge (early-mid 2021) demand for land for logistics and warehousing – this being an obvious result of the Coronavirus pandemic and lockdown with online sales rocketing by almost 52% in August 2020 alone. Land adjacent to established towns and close to important motorway or main road junctions will be well worth considering for this type of use.- while less value than residential land, nevertheless, it offers landowners the chance to potentially hold on to their freehold and enter good long-term leases with a ‘steady’ income and added benefit of retaining the ownership. Sadly, most of the main 25 UK logistics developers prefer to simply buy the land subject to planning permission and develop it themselves – but it is always worthwhile asking the question !
Land values for these uses are easily running at between £500,000 to £650,000 per acre in the most desirable locations and (e.g.) near the M25.
https://www.logisticsbusiness.com/materials-handling-warehousing/distribution-centre-property/demand-for-uk-logistics-space-hits-record-levels/ for more information.
Carehome and Retirement Land Values - 2021
The carehome sector continues to grow although the majority of this is for ‘later living’ rather than specialist care. The market is consistently under-fed in terms of new sites and demand strong. Landowners should always at least consider retirement development in the ‘mix’ of development at a residential site as the land values per acre are so much higher.
Developers are paying between £2M to £4M+ for sites of 0.75 acres to 1 acre+ in the Midlands, South-West and North of England. Similarly decent prices in good parts of Scotland and Wales too. In top locations and certainly in London retirement sites of up to 1.5 acres can be worth £25M with planning. Most sites are being sold for between £6M to £10M+ in and around London.
See these publications for more information :
New Alternatives for Farmers & Landowners - The Future
There are also growing alternatives for landowners in the field of ‘sustainable energy’ developments as potential has now moved on from the Solar Farms (Photovoltaic or ‘PV’) and wind farms to battery storage facilities, gas reciprocating engines, large new tracts of forestry for carbon capture and even microhydro power projects which have particular potential for hill farmers.
Long-term leases can be signed with Solar, Wind and Battery Storage companies and easily create a long-term gross income stream of in excess of £50k to £100k per annum.
See the following links for more information :
https://stateraenergy.co.uk/ - Battery banks and gas fired reciprocating engines
https://thefarmingforum.co.uk/index.php?threads/micro-hydro-power.95338/ - Microhydropower
https://www.forestcarbon.co.uk/ - Carbon Capture with new forestry
For more information :
If you are seeking any general advice on how to develop your land then please call John Holland on 07971 389895 or Marianne Horton on 07701 045959 and we will be pleased to discuss this with you. Visit https://www.landsite.co.uk/ for more information.