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