“Brexit means Brexit” but what does Brexit mean for Development Land?
There has been a great deal of heightened emotion over Brexit in recent months. Whilst many are suffering Brexit-fatigue, even the most hardened “outies” admit that the vote is having an economic impact; hopefully a temporary symptom and largely caused by key decisions being put on hold with knock on economic consequences. It does seem though that some real world consequences are now being felt.
But what does it mean for those with housing sites under option agreements or in the planning system?
Firstly the bad news (or the media spin). There has been much made in the press of house price falls and a rapid drop off in sales rates. Coupled to massive falls in house builders’ share values of 30% post referendum, you could be fooled into thinking that it is all doom and gloom.
However, our own experience is that house prices and transaction rates being reported in the media is largely London centric (a market whose bubble had popped pre-Brexit anyway). Our own Estate Agencies are still showing strong sales and no drop off in values. As for housebuilders, it is important to remember that they only make money from building houses. The post vote dip in share prices was largely as a result of stock market trading and uncertainty, not as a result of house prices crashing, which is more important for land prices.
Housebuilders will continue to build and sell houses as quickly and for as much money as the market allows. Therein lies the answer (or at least part of it). However, it is one which only time will tell.
Land prices for development land are subject to a huge amount of influences and it is important to understand them all and not only the media hype on house prices. Brexit may be headline grabbing but less newsworthy (although not necessarily less important) are Community Infrastructure Levy, affordable and starter homes, build cost inflation and a dizzying array of abnormal development costs. All of these have a huge influence on development land values and all warrant careful scrutiny with an experienced eye.
Supply and demand for housing is a national, not European issue (a national crisis according to the Government). Pressure on local councils remains strong to deliver planning permissions and build new houses. With changing markets, Councils may be faced with having to lower contributions for affordable housing and developer contributions to ensure the delivery of housing rates.
Housebuilding is a key industry propping up the economy and the labour market. It is therefore to be expected that the Government will seek to keep house sales going through incentives and other measures. Government will be desperate to avoid the house market drying up and prices dropping, if for no other reason than it is a constant negative headline grabber.
My own feeling is that the drop in interest rates is the first of such measures to steady the market and potentially a smart one. Suddenly wavering house buyers have a positive story. Imagine the impact if rates had gone up. However, clearly there is only so far to go with that particular solution and now only 0.25% to play with, unless rates go negative and who knows what that looks like?
What else is in the Government’s arsenal remains to be seen. However, for the time being if landowners are being told that development land is worth less as a result of Brexit then this needs to be examined in detail and with an expert eye. The old adage that you only get to sell it once is as true as ever.
If you would like any advice regarding a planning or development project please contact: Richard Garland 01665 511992