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The Fish

Building Plot Prices

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I was looking at building plots in the Borders a couple of years ago but dismissed the idea due to totally delusional prices. Now considering Stirlingshire or thereabouts. Anyone with any experience buying or negotiating? From your experience, any basis to the saying that plots are disproportionately overpriced in a boom and underpriced in a downturn?

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This is a very crude as each site is specific to the build.

But in boom times land was up at around 40% of the gross development value in typically suburban areas.

Now land is at around 20% of the gross development value in typically suburban areas.

In boom times cutting part of a garden from a house with a large plot typically did not down value a house in a typical suburban area.

Now garden land has a higher worth than building land as it tends to decrease the house more than the plot value.

Cities have crashed further as residential land in many cities is at 0% of the gross development value.

Residential land in many cities has less value than parking land, dumping land or car boot sale land values.

The problem with looking for self build land is that neighbours generally get pissed off . Its then not that nice to live in a road where your neighbours hate you for building a house.

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From your experience, any basis to the saying that plots are disproportionately overpriced in a boom and underpriced in a downturn?

This is absolutely true.

As a simple mathematical example of this:

Nice plot to build a lovely 200 sq.m. house on.

:DGood times :D

House price at peak: £2,400 per sq.m.

Construction cost at peak: £1,200 per sq.m.

:ph34r:Bad times :ph34r:

House price now: £2,000 per sq.m.

Construction cost now: £1,150 per sq.m.

Put on developer hat:

Good times sales price: £480,000

Good times build cost: £240,000

Good times plot cost (say 40%): £192,000

Good times profit (oh yeah baby): £ 48,000 (margin of 10%)

Bad times sales price: £400,000

Bad times build cost: £230,000

Bad times plot cost (say 25%): £100,000

bad times profit (really?): £ 70,000 (margin of 17.5%)

The above might seem counter-intuitive in that you seem to be able to make more profit in bad times. However what happens in "good times" is that the profit margin invariably ends up being higher than this example as the price of property goes up from when the "maths bit" was done resulting in all the clueless newbies that went on Sarah Beeny's show thinking they were geniuses when she'd point out that the market had saved them.

Of course in the bad times, although the "profit" looks very attractive, you can't get bank financing which makes it a lot tougher to build anything and once you've finished your speculative property development, there is a decent chance it might just sit there on the market for several months before somebody offers you 10% below "market price".

However you can see the mechanism for the plot price going down by much more than the underlying property (in this example property value declines 17% whereas the plot cost declines 48%). In a lot of cases these numbers are quite close but more for development type sites (i.e. a site 50 houses now owned by a bank...) than "unique" building plots owned by an individual who like everyone else will be in denial over how much prices have fallen.

The cost of construction hardly comes down at all - you can maybe get deals on building materials as many builders merchants will be running their businesses to generate cash but most tradesmen's rates haven't come down. You're more likely to be able to get quality guys to turn up and do a good job but the rate they charge has not come down by much at all.

Adding it all up, if you can afford to build your own home (that you want to enjoy and live in for a long time) and can secure a reasonably priced site off someone whose head isn't still in cloud cuckoo land then now is a great time to do it (in my opinion).

Good luck finding the site!

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Erm - handy for the A82. Suspect they think someone will buy it coz it has "views". Of the A82 on one side and a rock face on the other...

you get a lovely view of the local BP station just 30 yds away

or "convenient services nearby" in EA talk

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Thanks for your input. Can you image being trapped between the rock and the Ballachulish/Fort William road in summer? Nightmare, especially if you've paid a fortune for the privilege. That one really sums it up.

Sellers of plots are clearly not being forced by the market to consider lower prices, which would account for plots I have monitored sitting at the same ridiculous price for 2+ years. As long as there is, or the perception of, a supply of southern/city downsizers and retirees, sellers will just sit and wait for someone to pay up an extortionate asking price.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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