Cordea Savills pushes government strategic land as investment opportunity for IFAs

20 August 2007 - Source: http://www.ftadviser.co.uk/default.aspx?m=11173&am

IFAs should look towards enhancing returns for their clients by investing in 'strategic land', or land that is allocated for development by local authorities, or unallocated land that has the potential for future development for housing or other uses.


According to European property fund manager Cordea Savills, with little sign of demand easing, one of the key focuses will be increasing supply.

Gordon Brown recently declared that one of his top priorities as Prime Minister is home-building, with a new target of building three million new homes across the UK by 2020.

It is widely reported that there is a massive shortfall in housing in the UK, which has helped push the average price of a house up by 225 per cent over the last 10 years, according to Nationwide figures.

Although housing completions have been rising over the last five years, the amount of land with planning permission has been falling, with most commentators agree that reversing this trend is the main task if output is to be boosted.

The value of strategic land can be enhanced by undertaking asset management initiatives, such as securing development framework allocations, obtaining planning permission or installing infrastructure such as roads and drains, or by splitting the land into smaller parcels before onward sale to house-builders.

For example, the value of greenfield land with residential planning permission was worth around 450 times more than agricultural land at mid-2007, according to Savills Research.

However, there is of course no guarantee that planning permission will be given and investors must factor this in.

Value can also be increased by selling strategic land in packages; developers are prepared to pay proportionately more for smaller plots of land because they represent a shorter-term development with lower holding costs.

Kerrie Shaw, associate director of research and strategy at Cordea Savills, said: "Many investors chase similar investment themes in UK property, overlooking areas that offer the potential for higher returns, such as strategic land.

"The great advantage of strategic land is that there is the potential for a very significant uplift in value from progressing the land through the planning process. Profits from land can be extremely high, even in times of falling house prices. Furthermore, value can be enhanced by making the land more readily developable. Moreover, we should not forget that the shortage of affordable homes is now at the forefront of the political debate.

"If you have a large, diversified portfolio of strategic land and the right asset manager to promote the land through the planning process, you have a better chance of creating substantial returns now than ever before".

 

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