Property

Would planning permission add to the value of a site for sale?

The plot should be subdivided to maximise value, writes Paul Stack

Some thought should be given to the costs associated with the subdivision such as increased legal, engineer and agent fees and the tax implications for the sale proceeds

Tue Oct 13 2020 - 06:00

My father has a site in our local village. It's approximately 40 metres x 25 metres. The land is zoned A2. He is thinking of selling it. Should he sell it as is or should he seek planning permission to build one or two houses on it and then sell, in order to achieve maximum market value? Should he build it out himself? Are there any other factors he should take into consideration when preparing the site for sale?

Paul Stack replies: With regard to this query, my initial thoughts are that the plot should be subdivided if at all possible in order to maximise value. It is not mentioned whether it is the 40m or the 25m measurement that fronts onto the public road. A more significant road frontage would potentially allow for a number of residential sites with direct access onto the public road. This of course would be dependent on planning permission being granted for such development.

You say the land is zoned A2 (providing for development) but you do not say which local authority area you are in. Land zoning categories vary from area to area so I suggest as a first step you contact your local authority or consult your local development plan to ascertain what development is permissible.

Based on that, perhaps a preplanning meeting could be arranged with the relevant local authority to determine how receptive it would be to a subdivision and what layout and number might best suit the plot. It would be advisable to engage an architect/engineer to prepare some sketches for discussion purposes and have them attend any meeting with you.

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Other factors to be taken into consideration might include sight lines on the public road; the availability and capacity of services (water/foul); the type and quality of properties nearby; and the strength and demand of the local market.

Once clarity is provided on what planning permission would be attainable, then it would be a good time to engage with a local estate agent. The agent should be able to advise on achievable prices for new houses if you choose to go that route or alternatively how best to market the sites if you choose to sell the land. S/he will also be able to identify likely purchasers for houses or sites.

Some thought should be given to the costs associated with the subdivision, such as increased legal, engineer and agent fees and of course the tax implications for the sale proceeds.

You don’t say if your father has previous experience of housebuilding projects, but this is clearly an important factor if you choose to go that route. As a general rule a project like this usually takes longer and costs more than planned. I would advise you to enrol the services of a building surveyor and/or quantity surveyor to advise on your planning application and do up a projected cost plan. Good planning and strict cost control are critical to the success of projects like this.

Armed with all the above information you will be in a strong position to make an informed decision. The rest will come down to personal preference and circumstance. For example, what is your father’s financial situation? What is his appetite for taking on risk? Is he in a position to raise affordable finance? It’s worth noting in regard to the latter that there are a number of Government schemes open to housebuilders and it might be worthwhile investigating those.

Anther point – which one-off developers tend to forget about – is VAT, which is 13.5 per cent and is included in the sale price of the house. The SCSI recently published its Real Cost of New Housing Delivery Report 2020, and while it focuses on the construction of privately built three-bed semis in the Greater Dublin Area, a lot of the cost headings, both hard and soft, would be relevant to you.

Without knowing your exact circumstances, it is difficult to proffer specific advice. Covid-19 has led to an increase in remote working and that in turn is leading to increased interest in working in rural areas. A key factor supporting house prices at the moment is the lack of supply and that looks set to be with us for many years. So,k if your village is an attractive place to live, I would anticipate keen interest in sites – especially with planning permission.

If you are in a rural area and you build the house/s yourself, my own view would be that at the present time you are unlikely to make a profit. But the definitive answer for your father will be in the numbers – study them carefully; they don’t lie.

Paul Stack is a registered valuer and a member of the Society of Chartered Surveyors Ireland scsi.ie

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