Sunday, 28 October 2012

Who pays the hand out in the long run.

In anticipation of selling their site The Guide Dogs for the Blind have applied for planning permission for 66 dwellings to maximise their sale value.

Word on the street is that the council has asked them to submit a new application for even more dwellings.

The good news for me is that this evidences the that the Tory council have actually decided to cram houses in the centre of Wokingham, it's not just cash for the developers who may be influencing them.

Regardless of motive. The giving of planning permission, the way it is presently financed, is printing money.  Literally multiplying land values, which is why lobbying is a worth while investment. As a charity this is less disturbing than the usual situation. We like giving to charity. But who will be giving them the money in the long run and how much?

If land suitable for 6 of three bed terraces is an additional £50k for each of those dwellings permitted then that's £50k that will eventually be passed on to each purchasing household. Unless it is the actual developer who received the planning permission, in which case it could subsidize their costs. But that would only result in a price reduction if there was no free market in which properties do sell at multiples of build costs even for investment buyers.

Then there is often then a Section 106 for each property to build infrastructure, which the present party will spend on something nice and publicize as an great achievement, lets say £16k per dwelling. We now have a £250k dwelling with £66k worth of added expense that will be passed on to the new occupants.

If the development is large enough then they may be required to build affordable housing. Worst case scenario for the developer is that they are required to sell the affordable housing at about 60% sale value to the housing association. But taking into account that they may not have been given the planning permission hand out, this makes the perhaps 40% affordable housing sold nearer to cost to HA require buffed up margins on the other 60%.

At the moment this is a mute point. Property prices are too high and can not be sold for less since sellers can not sell at negative equity. There is plenty of Margin. But the planning mark up, section 106's and affordable housing means that profits can be squeezed down to reasonable levels at current sale prices.

But the problem is that the solution lies in sorting out property / salary ratio's. Doing a massive construction blitz now relies on the young taking on debt and will increase the  ratio of rented against privately owned.  So what are we about to achieve?

This is personal debt. The very cause of penny pinching, the cause of both parents having to work and, given the lack of free time and spare cash plus the internet stores competitiveness through lack of overhead we are witnessing the death of the high street.

Also the family generations without privately owned homes to form the bulk of an inheritance miss out on the starting influx of capital that only appreciated property assets can bring.

So my Tory council. I accept that you do not make the rules. But you are aggressively following a path that enhances inequality and debt. Hear Hear.

No comments:

Post a Comment