Selling Development Land Quickly for Cash
The UK is a small island where land is finite and a rare commodity. Despite coronavirus having an impact on the short-term demand for housing, in the long-term, industry experts are confident that demand will increase.
Selling residential development land quickly is no easy task, as usually, we are talking about a large lot size with restrictive buyers or developers who would be interested. Obtaining finance through high street lenders is notably difficult following the recession, and if you are an investor or even a property developer, you will need to have 50% of the deposit to acquire development fast.
In this article, we’ll look at what development land is and the history of it, in addition to how you can sell land for development fast.
What is development land?
Development land refers to land that is being bought for development, whether it’s to build residential or commercial properties.
While property developers will typically buy this land for new-build or investment purposes, first-time buyers are also seeing the attraction of development land, to enable them to get on the property ladder.
Also referred to as building land, there are two different types of land for development:
- Greenfield land: This refers to undeveloped land including forests, parks and fields. This type of land is often more difficult to obtain planning permission for, but it’s the most popular type to build on.
- Brownfield land: Also known as urban land, this land previously had another building on it, making it easier to obtain planning permission for.
The current market
Savills found that pre-lockdown, the development land market was looking positive, with a renewed confidence following the general elections.
With many construction and housebuilding companies pausing work during lockdown, most sites have now reopened – in fact, during the beginning of lockdown, 10% of all sites were working.
Despite workers being able to get back to the site however, one issue faced by developers, is the issue with securing required materials.
Cash-rich investors and developers are leading the trend when it comes to looking for land for development, whereas some purchasers have asked to defer payments, or have even paused activity as they’ve had to reassess their financial situation.
The value of land itself has remained fairly consistent, with the price of greenfield land rising by 0.3%, and urban land rising by 0.2% in Q12020.
The general elections in December 2019 had a huge positive impact, with net reservations for new homes up YoY in January, and many housebuilders reporting an increase in sale rates.
The history of selling land for development
Since 2010, the government has built more than 464,000 new homes, 114,000 of which are social housing. The housing crisis has been very prominent in recent years – in 2019, 3.6 million people were living in overcrowded homes, 2.5 million were unable to afford to move out from house shares, their parents or ex-partner’s homes, and 1.7 million were in unsuitable housing. Sadly, 2.5 million people were also unable to afford their mortgage or rent.
The good news is, that since 2012, the number of homes being built has grown – in 2015 for example, 21% more properties were completed in England, compared to in 2014.
As a trend, housebuilders are increasingly investing in larger sites – in 2016, the average development land had enough space for 72 plots, whereas in 2017, that had risen to 87.
One area that’s seen a huge increase in the purchase of land for development, and property prices, is Manchester. Urban land values rose by 24%, compared to the UK average of 4%, and as a result, house prices rose more than double the national average, at 8.6%. This was likely due to the creation of Media City, and the volume of companies – and people – moving from London to Manchester.
Selling land for development: the solution
We have established there is a growing shortage of properties for the UK public, but one of the issues the industry is facing, are the restrictions put in place by high street and mortgage lenders, which means there is a liquidity issue in the market. In simple terms, unless you have a substantial deposit, the lenders won’t entertain you buying development land.
If you want to sell your development land, not only do you have to consider the demand for it, but you’ll also have to do the following things:
- Get tax advice: Speak to a professional to see if there are any reliefs or exemptions that you qualify for, such as Capital Gains Tax, inheritance tax, stamp duty land tax, and income tax. Before any developer purchases the land off you, they will likely want to know that you’ve received advice on taxes.
- Draw up a Promotion Agreement: These agreements enable the promoter (usually the developer) to apply for planning permission at their own cost. Once they’ve obtained planning consent, as the landowner, you must sell the land, with the promoter receiving their fee from the proceeds.
- Explore any potential environmental issues: Collate together previous surveys or reports that have been carried out on your land, as would-be buyers will want to know if there is a risk off flooding, or if the land is contaminated.
If you’re looking to fast, then the best way to sell land for development could be a cash property buyer like ourselves. Specialising in buying building land fast, whether it’s for houses, flats or even commercial uses; on average, it takes us two weeks to purchase development land.
To find out more about selling your property fast, and to receive a free cash offer, get in touch with us today.