Buy-to-let is dead — many say — killed off by George Osborne’s stamp-duty hike and withdrawal of tax allowances. Welcome to the new way to make money: buy-to-build. An unintended consequence of the government’s drive to reform planning laws has been a speculative boom in land adjoining villages and built-up areas. Plots that were once considered out of bounds to developers are now viewed as possible building sites, with vast profits on offer to anyone who can outmanoeuvre the planners.
Until recently, developers didn’t take much interest in my village. Occasionally, a new house would pop up in the garden of a former council house, but otherwise the only chance of obtaining planning permission for a new property was to buy an old farm building and convert it, or pick up an old bungalow which could be replaced with something grander. The village, ten miles from Cambridge, is categorised by East Cambridge-shire District Council as ‘infill-only’. Anything outside the designated ‘development envelope’ is contrary to planning policy.
Consequently, any land which came up for sale around the village tended to sell at agricultural prices of between £5,000 and £10,000 an acre, or up to double that if it was a small and particularly attractive pony paddock with water and electricity laid on. The only people who might pay more — or so it was suspected — were travellers. Consequently, villagers would nervously gather whenever a ‘Land for Auction’ sign went up, fearful that, come the next bank holiday, piles of hardcore would go down, followed by a dozen caravans and Transit vans.
But that all changed last autumn when a 2.75-acre paddock was put up for auction at a guide price of £75,000. If that seemed excessive, the hammer eventually fell at £122,000, equivalent to £44,000 an acre: even travellers are now being priced out. At first we heard that the buyers wanted the land for horses, though that seemed odd as they lived further away than anyone might want to drive to feed their nags twice a day.
Sure enough, they turned out to be developers. A few weeks ago, a planning application was submitted for a rather large house. To judge by the plans, the finished building would be worth in excess of £1 million —which, if planning permission were to be granted, would make the land suddenly worth at least £300,000. If additional houses were allowed on the site it would be worth considerably more. That is still a big ‘if’. The site remains designated by the district council as open countryside. Planning permission ought to be refused as a matter of course. Trouble is, thanks to the government’s planning reforms, many believe that council policies (‘local plans’, as they are officially called) are no longer sacrosanct. If a government inspector rules that a local plan makes insufficient provision for new housing — as has happened in East Cambridgeshire and many other districts — he can demand that the council thinks again. In the meantime, if a frustrated planning applicant appeals against a council’s rejection, the final decision will be made by a government inspector on the basis of national policy.
Speculators are therefore hoping to exploit what could turn out to be a narrow window of opportunity. They might be hoping to frighten a hard-up council into granting planning permission to avoid the legal costs of fighting a planning appeal. Or they may be calculating there’s now so much pressure for new housing that there will have to be a general relaxation of planning policy before long. And they may be right. One of the factors driving land speculation around my way is that a significant chunk released from the Cambridge ‘green belt’ a decade ago is now a large housing estate.
Opportunists have been bolstered by a Council to Protect Rural England report claiming that the number of new homes planned for green belts has surged by 20 per cent in a year. Often, when councils release land from the green belt, they add other parcels of land to the belt to give the impression that the protected area has grown — making a nonsense of the concept. The message has got around that all planning controls are now flexible.
Since last October there have been some even more dramatic land sales. Last month, a 1.1 acre site in the village of Barrington, with no planning permission, sold for £131,000.
This is a higher-stakes game than buy-to-let. If you can beat the planners, you’ll make a fortune. If you can’t, you may find yourself sitting on land that produces very little income: agricultural yields can be as low as 1 per cent. On the other hand, if the planning system were to be relaxed to the point that anyone could build anywhere, then the price of development land would crash. Speculators are relying on the possibility that their piece of land manages to get past the planners, but that not too many others do the same. An artificial shortage of land created by the planning system is still, after all, the goose which lays golden eggs for a lucky few.