Building up land supply

LANDOWNERS can look forward to a bumper 2003, as builders resume buying land for housing and millions of euros are on offer for zoned land.

Housing supply increased in 2002, but the stand-off by builders over section 5 of the Planning Act reduced the year’s overall number of planning applications, indicating the likelihood of a temporary shortage.

The catch-up game will begin in earnest in 2003, with the Government, local authorities and developers keen to bring land supply up to sufficient levels, especially in the major urban areas of Dublin, Cork, Galway, Limerick and Waterford.

Adding fuel to the fire of bidding on land banks, many local authority development plans are up for review/renewal in 2003.

Two critical land sales in the offing show how high the zoning lottery stakes can be: in Cork, a land sale of €22m, for 70 acres on the edge of Douglas village, is being negotiated, while, in Passage West, a few miles away, a smaller parcel of land, of 40 acres, is selling for €17m.

For both sales to reap such a rich harvest, the land needs to be rezoned in mid-January by Cork County Council, and the council is in the final throes of its new Development Plan. Only part of the 70 acres in Douglas, near Maryborough Hill, is in line for rezoning.

Major builders are understood to have terms agreed on each land parcel, subject to the land being approved for residential development.

After the changes to the Social and Affordable Housing provisions, confirmed prior to Christmas, it is expected the building industry will put forward a large amount of land for planning permission - this after a year in which few significant planning applications were lodged.

Although not much development land changed hands this past year, the lots that did sell, especially those with existing planning permission, made strong prices, with investors back in the market and borrowing levels remaining low.

Ronan Webster, of Insignia Richard Ellis Gunne, says land with planning permission for housing rose in value in prime areas by as much as 50% during 2002.

Examples of strong sales included the AIB sports grounds in Terenure, in Dublin 6, for €9.5m, in January, 2002.

Also, a site which failed to sell in 2001, after a long period on the market, but sold in 2002 was Clancy barracks, in Kilmainham, which, along with Murphy barracks, in Cork, made €65m.

Showing the value of location, a 0.44 acre site at Portobello, in Dublin 8, with planning permission for 47 apartments, sold for €7.2m, averaging €150,000 per unit in site cost.

According to major land-sale agents, Gunnes, demand for residential land will continue to remain strong, considering the favourable interest rate environment and strong investor demand.

The retention of the 20% capital gains tax rate “will ensure that capital gains tax will not be a factor in slowing down activity,” Gunnes say.

Gunnes argue the case for a national planning authority to work in association with other national agencies to regulate the Irish planning process.