How is land valued with and without planning?
An existing use value of the site can be obtained through information that the landowner may already hold or by looking at comparable transactions within a defined area. This can be obtained via our own independent investigations or where necessary appointing a RICS-registered valuer. To ascertain the approximate value of the site with planning, Interurban will start by undertaking a preliminary “residual valuation”. The calculation is Gross Development Value minus the overall build costs plus an industry standard profit margin, the residual represents that approximate land value with planning in place. This figure will be anecdotal until a clearer idea of the scope of allowable construction as a result of conversations with the necessary consultants. Furthermore, it is necessary to undertake more sophisticated calculations based on specifications, unit sizes and a number of other variables / practicalities.
What are the Transaction and Planning Costs?
After initial analysis of the land / development site, Interurban would typically present a scope of works alongside remuneration requirements (usually based on the added value achieved as a result of planning permission being granted) along with a promotion method. Interurban will in most cases absorb the planning application and professional service costs but this is dependent on the landowners preferred method of land promotion. Depending on the development and application type the local authority fee will vary. Extensive investigations and technical reports come at cost which depends on the site constraints, scope and size of the project. They can include design and access statements, transport assessments, flood risk assessments, waste disposal, utilities management, environmental and energy assessments, topographical surveys, structural surveys, arboriculture (tree) surveys, ecological reports, invasive species surveys, sustainability assessments and contaminated land surveys. Developer Contributions are now, in most areas, an integral part of the planning application process. Planning authorities have to take account of future impacts on local communities and ensure there is appropriate services in place where land uses change or intensify. Where there are impacts these can be alleviated through the payment of developer contributions or some other element of on-site planning gain. This can relate to affordable housing provision, school capacity, health services, recreational provision, transport infrastructure and other amenities. The risk associated with developer contributions will be managed in a way to maximise the land value either via upfront payment or securing contributions via legal agreements.
What are the Alternatives?
Interurban would expect land and property owners to consider the alternatives when trying to realise the value of property or land. Traditionally this could entail: –  Seek planning permission directly. Seeking planning permission is extremely costly, time-consuming and can fail without experience of the process and understanding the pitfalls.  Approach a builder. The majority of small to mid-sized professional building firms do not have in-house planning teams in place and generally prefer to purchase land with planning consent in place. This is often due to the uncertainty that governs the planning process in addition to the cost and time constraints involved. This is well documented in the Federation of Master Builders publication ‘Delivering More Homes Through Small Sites: Small is Beautiful’. Whilst purchasing sites without planning may not be ruled out by a builder, most will require a suitable discount to factor in the associated risks and any costs of enhancement in line with their needs. Interurban always tries to frame promotion offers in a way where it meets the expectations of all parties to create a ‘win – win’ situation. Time will always be provided to give you and any co-owners time to consider the proposal and engage in your own due diligence. It is appreciated that this may involve seeking independent legal and tax advice depending on the contract type and scale of the development site. Interurban is always flexible in accommodating owner’s specific requirements into any contract. In line with codes of conduct set by the RTPI and the RICS Interurban Developments Ltd will only progress with chargeable works once all parties involved are comfortable moving forward and term of engagement have been confirmed. Interurban can then begin work on the formal application process.