Agricultural land surrounding urban areas is commanding huge price premiums from property developers and leading to price spikes locally.
Well-positioned parcels with planning permission have sold for as much as £1m/acre in the south of England and £600,000/acre further north, while land in north Wales has gone for 50 times its agricultural value.
Agents say that a growing population and more confidence in the economy is leading to greater development activity, while the government’s National Planning Policy Framework (NPPF) is helping developers appeal local planning decisions.
Top tips for selling development land
- Proceeds from the sale of development land can be rolled over into qualifying assets like land, buildings and fixed plant and machinery. To qualify for full capital gains tax relief all proceeds must be invested (normally) within three years.
- Assets purchased from land sales can sometimes be passed down to the next generation after a certain period, holding over the gain.
- Take advice and be properly represented – initial offers can be misleading and even small improvements can make a huge difference.
Rob Selley, associate, AC Mole & Sons
- Land promotion agreements are generally better than option agreements – the landowner retains the land and is actively involved in the sale process. The land is offered to the open market and competitive bidding can see variations of 30% or more between the highest and lowest bids.
- Choose a promoter carefully – check their track record and financial standing.
- Ensure all cost and risk sits with the promoter.
- Ensure there is an arrangement with any other owners of land involved in the scheme, which will divide the proceeds and sale costs.
Charles Meynell, partner, Fisher German
Typically, farmers who sell land to developers are reinvesting in business assets to avoid capital gains tax.
In some regions, this rollover relief has led to buyers paying above market value for land, leading to price spikes in the local market.
Farmers Weekly spoke to land agents around the country:
“There has been more activity on the market in the past 12 months, likely due to the NPPF.
“We have seen land with hope value and no planning permission commanding up to a 50% premium and other parcels doubling their money where outline planning has been sought.” Sophie Greco, Robinson & Hall
“It’s probably as good a planning climate as I can remember in the 40 years I’ve been in the business, principally because of the NPPF.
“A piece of arable land south of Birmingham worth £8,000/acre with planning for houses is going to be worth either side of £1m.
“Further north the price tends to drop but people making 500,000-600,000/acre is not uncommon.” Harry St John, Smiths Gore
“Whether land is within or outside the development boundary and subject to planning permission has a significant bearing on its value.
“If bare agricultural land makes £10,000/acre and with detailed planning permission realises £500,000/acre, the hope value ranges somewhere in between.” Eifion Bibby, Davis Meade
“We are seeing land taken by developers under option or land promotion agreements and have examples of farmers with rollover relief paying premiums of 10%.
“Most are buying land for farming purposes with the potential long-term gain.” Charles Meynell, Fisher German
“Kent has seen a lot of residential land activity over the past two years since the Localism Bill.
“For most land owners planning has been a much quicker and painless exercise than they envisaged, side-stepping appeal mainly due to the local authorities’ failure to have secured adequate supplies of building land to meet NPPF targets.” Richard Thomas, BFT Partnership
“The rollover buyer is back. These buyers have been absent from the market in the past few years, however they are having an affect today.
“With less land to buy and more land being developed there will be pressure to reinvest, which can lead to premiums being paid.” Will Parry, Savills
What land is attractive to developers?
- Ideal plots for new homes range from five to 40 acres.
- Greenfield sites with no previous development.
- Sustainability is key, so small villages with no facilities are unlikely to be granted planning permission.
- Sites close to schools and hospitals with good transport links.
Ben Marshalsay, partner, Fisher German
“We have been selling land throughout the past year on the urban fringe.
“This used to fetch less than good arable or dairy land but now is probably on a par with better farm land.
“We have sold land close to towns for up to £15,000/acre and it’s having an upward effect on prices generally.” Graham Bowcock, Berrys
“We are seeing some farming families with considerable funds to acquire the right property.
“Some prices paid in private sales have been considerable and in our opinion will only continue to rise due to land shortfall.” Matthew Peters, Bruton Knowles