Tuesday, 12 November 2013

"How to assess a building plot"

This fact sheet gives you the usual commonsense rules on how to work out the maximum price you should pay for a building plot:
Make sure you get the most out of your plot by carrying out some simple research before you buy
... When you go out to view a plot, do not just arrive at the site and start looking around. On your way in, make a note of the local architectural styles. Take particular note of new houses that have been built – they give the clue as to just what sort of design the local planning authority is prepared to accept.
They also give the clue as to those properties, which find favour in the market. If you decide that you want to buck that trend then be aware that you might be limiting your resale value or market acceptability.
Whilst some areas can carry an eclectic mixture of styles and house sizes, others are of a more consistent nature. Make sure that what you propose to build is going to fit in. If you think that a four bedroom house is going to look incongruous set in a street of two bedroom bungalows then you're probably right.
The planners won't like it and even if they did, when it comes to sell it you will have trouble. What fits into the street scene will, in most cases, represent the best property to build and the best return on your investment.
Well worth a read.
If that were a la-la-land Faux Lib fact sheet, the advice would be thus:
Just buy any old land
It is only landowners who have the foresight and vision to decide the best use of any plot, and it is only through their tireless genius and efforts that the value of a plot can be created and realised.
Only the actual individual owner of an individual plot has a clue about anything and nothing that anybody else does can influence the value of your plot. As an outsider you have no way of working out what the optimum use and hence land value is.
So all the gains that are to be made are in the future, once you have ascended to the hallowed ranks of landowner.
Therefore there is no risk of overpaying the current owner, as he is not contributing to the further decision making and work necessary and so he will not get any share of your own future hard earned and well deserved profits.


Bayard said...

From the advice sheet: "But when building costs are added to the land price, the profit margins in terms of apercentage yield, or profit related to expenditure, are remarkably similar, holding at
or around the 30% mark. In large part this is caused by the fact that the huge discrepancy in the ratio of land costs is balanced by the relatively small differences in build costs between the regions and the high market values of the finished property".

In other words, build costs (the brix'n'mortar element) is pretty much the same everywhere and the difference in house prices around the country is almost entirely down to the cost of the plot.

Mark Wadsworth said...

B: "In other words, build costs [etc]"

Yes of course, but his rule of thumb is a bit more subtle than that, and says that some of the "land gain" goes to builders, who are taking on a bigger commercial risk by buying expensive land.

The price they pay is to be discounted for interest and holdings costs while they finish the build etc.

Robin Smith said...

Yes, its a religious activity being a fauxlib land owner. You did provide the land after all. You are a God no doubt!