De­vel­op­ment land sales set to eclipse €1.2bn mark by year end

Irish Independent - Business Week - - COMMERCIAL PROPERTY - Donal Buck­ley

More than €1bn worth of de­vel­op­ment land has been bought since the start of this year and the fig­ure could reach €1.2bn by the year end if the cur­rent mo­men­tum is main­tained.

In the month of Septem­ber alone 21 sites in the Greater Dublin Area with com­bined guide prices ex­ceed­ing €212m were brought to the mar­ket and they ranged in price from €2m up to €40m.

The in­creased sup­ply is partly due to the Govern­ment’s ‘car­rot and stick’. Many own­ers are sell­ing be­cause the Govern­ment re­duced the hold pe­riod for Cap­i­tal Gains Tax (CGT) ex­emp­tion to four years. So if they bought be­tween 2012 and 2014 they can now take their prof­its without pay­ing CGT.

Cathal Daughton of Lis­ney says an­other fac­tor has been the va­cant site tax on va­cant hous­ing land in ar­eas with a need for hous­ing. The levy will cost 3pc of mar­ket value in 2019 and 7pc in sub­se­quent years.

An­drew Long of JLL Ire­land says a fur­ther fac­tor is that land val­ues have reached lev­els which en­able ven­dors to clear debt on land they are hold­ing. He es­ti­mates that since 2013 de­vel­op­ment land val­ues have risen by ap­prox­i­mately 50pc.

On the de­mand side, long-term hold in­vestors and de­vel­op­ers, in­clud­ing those from overseas, have been buy­ing sites.

“Co-liv­ing schemes are also at­tract­ing in­ter­est and fall un­der the new apart­ment reg­u­la­tions. In­ter­est­ingly, much of the Z6 zoned land in Dublin City Coun- cil is un­der pres­sure to be re­de­vel­oped for res­i­den­tial pur­poses and we will see higher prices for this type of land in ar­eas such as the Naas Road, Long­mile Road and in parts of north Dublin in ar­eas such as Bal­doyle and Fin­glas/Glas­nevin,” Mr Daughton says.

Evan Lon­er­gan of agents Knight Frank says that a fea­ture of the cur­rent mar­ket has been the lack of dis­count for larger sites. Tra­di­tion­ally the larger the site the fewer the bid­ders, so the av­er­age price paid per res­i­den­tial unit would be less but that has not been the case re­cently due to the amount of funds avail­able for sites which of­fer scale.

He also re­jects claims that de­vel­op­ers have been sit­ting on sites wait­ing for in­creases in val­ues. “The cost of funds is too ex­pen­sive and most of the fun­ders will only fi­nance sites which have plan­ning per­mis­sion and where they can get their money back within three years,” he adds.

A ma­jor seller in re­cent times has been Mar­let, the com­pany headed by Pa­trick Crean. Since the crash it has bought nu­mer­ous Dublin sites but unlike later land buy­ers, such as Cairn and Glen­veagh, it ap­pears to have sold rel­a­tively few apart­ments or houses. The com­pany did not re­spond to a ques­tion from this re­porter but it is re­ported to be build­ing apart­ments at Harold’s Cross and in the south Dublin Dock­lands.

Since 2017 it has sold some small sites and has stepped up its dis­posal ac­tiv­ity in re­cent months by of­fer­ing five de­vel­op­ment prop­er­ties to the mar­ket which could gen­er­ate more than €65m be­tween them.

The most valu­able of these is a Cabra site with plan­ning per­mis­sion for 419 apart­ments as well as a con­ve­nience store, creche and com­mu­nity cen­tre. With a €32m guide price that sug­gests a price of less than €80,000 per apart­ment site. The plot is reck­oned to have fur­ther po­ten­tial un­der the new de­vel­op­ment guide­lines for up to 600 dwellings which would equate to an av­er­age unit site price of less than €53,000.

Mar­let is seek­ing more than €13m for a 2.79 acre site next to Oat­lands Col­lege in Mount Mer­rion, which has plan­ning per­mis­sion for 64 res­i­den­tial units com­pris­ing: nine houses, 24 du­plexes and 31 apart­ments sug­gest­ing an av­er­age of €203,000 per unit site.

But Mar­let has also been buy­ing. The Ir­ish In­de­pen­dent re­cently re­ported that it paid more than €30m for the 6.61 acre Project Pier, for­merly known as the Techrete site, in Howth which has po­ten­tial for 340 apart­ments which would work out at more than €88,200 per unit site.

Of the 19 GDA sites in the €3m-plus bracket bought or launched in Septem­ber, eight were in shovel-ready con­di­tion as they had per­mis­sion for 1,867 dwellings.

How­ever some ex­perts have ex­pressed con­cern that de­vel­op­ers may wait to see what fur­ther changes the Govern­ment may make to plan­ning pol­icy in the hope of adding more units and con­se­quently this may fur­ther de­lay their de­vel­op­ment

For in­stance three of the ma­jor Septem­ber sites launched had per­mis­sion for a com­bined 1,136 units but the agents ad­vised that fol­low­ing changes to plan­ning pol­icy these could be in­creased by a fur­ther 235.

Marie Hunt of CBRE says: “Iron­i­cally, the re­cent pub­li­ca­tion of the Depart­ment of Hous­ing’s long-awaited guid­ance notes on Ur­ban De­vel­op­ment & Build­ing Heights will in­evitably de­lay some land sales as po­ten­tial ven­dors take time to as­sess the likely im­pli­ca­tions of these new guide­lines on pro­posed de­vel­op­ment projects.”

On the other hand, An­drew Long points out that the Cen­tral Bank con­straints on mort­gage lend­ing and its knock-on ef­fect on sta­bil­i­sa­tion of house prices may also be in­flu­enc­ing the sites mar­ket. He says that up un­til re­cently as the prices of homes rose sub­stan­tially the land value grew by a greater per­cent­age. “Typ­i­cally speak­ing if a hous­ing site is worth €30,000 on the sale of a €300,000 house then a 10pc in­crease in the sales price to €330,000 yields an in­creased price of €55,000 or an 83pc in­crease in the site value.”

“With house prices pre­dicted to grow sub­stan­tially there was no in­cen­tive to sell. Now as house prices sta­bilise, fu­ture land value in­creases are mod­er­ated and the in­cen­tive to hold land is not as strong as it was in the pre­vi­ous five years,” Mr Long says.

Two of the big­gest deals this year were in Dublin’s North Dock­lands with Ro­nan Group Real Es­tate (RGRE) and Colony Cap­i­tal agree­ing a price of around €180m for Project Water­front a 4.6 acre site with plan­ning per­mis­sion for 420 apart­ments and 300,216 sq ft of of­fices. Nearby a Kennedy Wil­son-led ven­ture paid €113m for 5.9 acres known as City Block 3 with of­fice and res­i­den­tial po­ten­tial.

On the Water­front: RGRE and Colony Cap­i­tal have agreed to pay €180m for Project Water­front, a 4.6 acre site in the Dublin Dock­lands

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