HOW CAN I INCREASE THE VALUE OF MY LAND?
How planning and development potential can create additional land value
If you own land, one of the most effective ways of increasing its value can be to establish whether it has development potential.
Land value is influenced by what the land can legally and practically be used for. A garden, paddock, vacant site, redundant building or underused property may therefore be worth considerably more if a credible opportunity for development can be established.
That does not necessarily mean immediately applying for planning permission.
In many cases, the first step is to understand what development might realistically be achievable, identify the principal constraints and then decide how much time and money should be invested in establishing greater planning certainty.
The objective should be to create value progressively while managing planning risk and expenditure.
CAN PLANNING PERMISSION INCREASE LAND VALUE?
Potentially, and sometimes significantly.
Planning permission can change how land is valued because it establishes that a particular form of development is acceptable.
Without planning permission, a purchaser may need to take the risk that development cannot be achieved.
With permission, some of that uncertainty has been removed.
However, the value created will depend on what has actually been permitted and whether the development is commercially attractive to deliver.
A well-considered permission for an appropriate and viable development may create more value than a larger but difficult or expensive scheme.
Planning should therefore be considered as part of a development strategy, rather than simply as an exercise in obtaining consent.
WHAT TYPES OF LAND CAN HAVE DEVELOPMENT POTENTIAL?
Development opportunities can arise in many different forms.
They can include:
Large residential gardens
Side gardens
Backland sites
Gaps between existing buildings
Paddocks
Agricultural land
Village-edge land
Vacant or underused sites
Commercial property
Redundant buildings
Former industrial land
Garages and parking areas
Sites capable of conversion or redevelopment
The fact that land is not currently identified as a building plot does not necessarily mean that it has no development potential.
Equally, simply owning a large area of land does not mean that development will be acceptable.
The opportunity depends on the planning context and characteristics of the particular site.
1. UNDERSTAND THE PLANNING POSITION
Before trying to increase the value of land, establish how it sits within the planning system.
This may involve considering:
Local planning policy
Settlement or development boundaries
Land allocations
Existing land use
Planning designations
Planning history
Nearby planning decisions
National and local constraints
This initial work can identify whether there appears to be a credible route towards development.
It can also prevent money being spent pursuing an opportunity that is fundamentally unlikely to succeed.
2. IDENTIFY WHAT COULD REALISTICALLY BE DEVELOPED
If there appears to be a planning opportunity, the next question is what form and scale of development the land could accommodate.
For residential land, this might mean testing whether the site could accommodate:
A single house
Two or three homes
A small housing development
Apartments
Self-build plots
A different form of residential development
Other sites may have opportunities for commercial, leisure, tourism or mixed-use development.
An indicative development layout can be particularly useful because it begins to translate the planning opportunity into something tangible.
This can expose constraints but can also reveal capacity that was not initially obvious.
3. IDENTIFY THE CONSTRAINTS EARLY
Constraints do not necessarily prevent development, but they can have a significant effect on both planning prospects and land value.
These might include:
Access
Land with no suitable access may have limited development potential unless an alternative access solution can be established.
Flood risk
Flooding can affect where and what type of development may be appropriate.
Trees
Important or protected trees can reduce the developable area of a site.
Ecology
Habitats, protected species and biodiversity requirements can influence the development layout.
Heritage
Listed buildings, Conservation Areas and other heritage assets may affect the form and scale of development.
Neighbouring properties
Privacy, overlooking, daylight, noise and general amenity can restrict where new buildings can be positioned.
Infrastructure
Drainage, utilities and other infrastructure requirements can significantly affect development costs.
Identifying these issues early allows the development strategy to respond to them rather than discovering them after substantial money has already been spent.
4. CHOOSE THE RIGHT PLANNING STRATEGY
A full planning application is not always the best first step.
Depending on the site, greater planning certainty might be established through:
Planning and development feasibility
An indicative site layout
Pre-application advice
Permission in Principle
Outline planning permission
Full planning permission
The appropriate route depends on the planning risk, complexity of the proposal and what the landowner is trying to achieve.
For example, a landowner intending to build the development may need a different level of certainty from someone looking to demonstrate potential before selling the site.
The aim should be to spend proportionately as the development opportunity becomes clearer.
5. CONSIDER WHETHER A DIFFERENT USE COULD CREATE MORE VALUE
Residential development is often the first opportunity landowners consider, but it is not always the only option.
Depending on the site and location, alternative uses might include:
Commercial development
Tourism accommodation
Leisure uses
Community uses
Mixed-use development
Conversion of existing buildings
The most valuable use will depend on planning policy, local demand, development costs and the characteristics of the site.
It is therefore useful to consider the land's potential broadly before committing to a particular scheme.
6. DON'T ASSUME MORE HOUSES MEANS MORE VALUE
Increasing the number of homes can increase the value of a completed development, but it can also increase costs and planning risk.
Trying to fit too much development onto a site may result in:
Poor relationships with neighbouring properties
Inadequate gardens
Difficult access
Excessive parking
Loss of important trees
Poor design
Greater infrastructure requirements
Increased planning obligations
The additional development may therefore create less value than expected.
The objective should be to find the optimum development capacity, rather than simply the maximum number of units that can physically fit.
7. IMPROVE PLANNING CERTAINTY
Land becomes easier for a purchaser to assess as uncertainty is reduced.
Planning certainty can be increased progressively.
For example:
Unassessed land
↓
Planning feasibility completed
↓
Development capacity established
↓
Positive planning engagement or principle established
↓
Planning permission
↓
Deliverable development opportunity
Each stage can provide additional information and potentially reduce risk.
The important question for the landowner is whether the likely increase in value justifies the cost and risk involved in reaching the next stage.
8. CONSIDER HOW THE LAND WILL ULTIMATELY BE SOLD OR DEVELOPED
Creating value is only part of the process.
The way in which the development opportunity is ultimately realised can also affect the landowner's outcome.
Potential routes can include:
Selling the land in its existing condition
Obtaining planning permission and then selling
Selling subject to planning
Entering into an option agreement
Entering into a promotion agreement
Partnering with a developer
Developing the site directly
Each approach involves a different balance of risk, control, timing, cost and potential return.
Professional legal, valuation and tax advice may be required before entering into a land transaction or development agreement.
SHOULD I ACCEPT AN OFFER FROM A DEVELOPER?
If a developer has approached you unexpectedly, it may indicate that they believe the land has development potential.
Before agreeing a sale, option or promotion arrangement, it can be useful to obtain an independent understanding of the site.
Consider:
Why is the developer interested?
What might they believe can be built?
How difficult would it be to obtain planning permission?
How much value could development potentially create?
An offer can look attractive compared with the land's existing value while still not necessarily reflecting its potential development value.
Understanding the planning opportunity before entering negotiations can therefore put a landowner in a much stronger position.
WHAT SHOULD I DO FIRST?
You do not necessarily need architects, engineers and a full suite of surveys immediately.
A proportionate process might be:
1. Initial planning and site review
Determine whether there appears to be a credible development opportunity.
2. Development feasibility
Consider what form and scale of development may be appropriate.
3. Indicative layout
Test whether development can physically work on the site.
4. Targeted technical advice
Investigate issues such as access, flooding or ecology where they could materially affect the opportunity.
5. Planning strategy
Decide how best to establish greater planning certainty.
6. Planning application or disposal strategy
Progress the opportunity once the risk and potential reward are better understood.
This approach allows investment in the site to increase alongside confidence in the development opportunity.
HOW MUCH COULD DEVELOPMENT INCREASE MY LAND VALUE?
There is no standard percentage.
The potential uplift depends on:
Existing land value
Development capacity
Local property values
Planning requirements
Construction costs
Infrastructure
Technical constraints
Development risk
The market for the completed development
For significant development opportunities, specialist valuation advice should be obtained.
However, before the land can be valued as a development opportunity, there needs to be a reasonable understanding of what could actually be developed.
That is where planning and development feasibility becomes important.
SWAP VIEW
The biggest opportunity is not always obtaining planning permission.
It is often identifying the right development proposition before spending heavily pursuing it.
We approach land by considering three things together:
Planning — what could obtain permission?
Architecture — what can physically and appropriately fit?
Development — what makes sense to deliver?
Where those three align, planning can create substantial value.
Where they do not, obtaining a permission simply for the sake of having one may achieve considerably less.
For landowners, the objective should be to invest progressively in establishing the opportunity while retaining as much flexibility and potential value as possible.
WANT TO UNLOCK THE POTENTIAL OF YOUR LAND?
If you own a garden, paddock, vacant site, redundant building or other land and want to understand how its value could potentially be increased through development, SWAP can provide an initial planning and development assessment.
We can investigate the planning position, identify the principal constraints, consider what might realistically be developed and advise on the most appropriate next step.
Send us the site address or location, a plan if you have one, and a brief description of the land and what you're considering.