Buying for planning potential without buying a dream
Planning potential is the most commonly overpaid-for feature in property. The market has already priced the hope, and it is frequently wrong about it.
A property with potential is priced with that potential already included. If a plot could take a two-storey extension, the asking price usually reflects some of the value that extension would add — which means you are paying for work you have not done and permission you do not have.
That does not make development a bad strategy. It makes it a strategy that requires you to establish, before you buy, whether the permission is likely to be granted and whether the uplift exceeds the cost. Both are frequently assumed rather than checked.
Establishing what is actually possible
The starting point is the planning history and the local plan. The local plan sets out the council's policies on density, design, affordable housing and protected areas, and it is a public document. It tells you what the council wants, which is the strongest predictor of what it will approve.
- Search the council's online planning register for the property's own history and for refusals nearby
- Read the local plan policies for the area, particularly on residential intensification
- Check for designations: conservation area, green belt, flood zone, listed building, tree preservation orders
- Establish whether permitted development rights remain intact, or have been removed by an Article 4 direction
- Look at recent decisions on similar sites, because appeal and committee decisions reveal the council's real position
Costing the process honestly
Planning is a process with costs, and they are larger and slower than most first-time developers expect. An application takes weeks to prepare and months to determine, and a refusal adds an appeal or a revised application.
- Architectural and drawing fees, often £2,000–£8,000 for a domestic scheme
- Planning application fees, set nationally and payable on submission
- Reports: flood risk, drainage, ecology, arboricultural, transport — each can be required and each costs money
- Community infrastructure levy and any section 106 contributions, which can be substantial
- The cost of the appeal process if permission is refused
- Finance costs of holding the property through the process
The option that reduces the risk
The most effective way to reduce planning risk is to obtain permission before you buy, or to make the purchase conditional on it. A conditional contract or an option agreement lets you secure the property while you apply, which converts an open-ended bet into a decision.
Where that is not possible, the price you pay must reflect the risk that permission is refused. That usually means paying close to the value of the property as it stands, with little or no allowance for the uplift you hope to create. Paying for potential you have not secured is how developers lose money.
Common questions
- Is it worth buying a property with planning potential?
- Only if the uplift, once you have costed the work, the professional fees, the reports and the finance, exceeds the premium you paid for the potential. Frequently the premium the market adds for potential is larger than the net gain, particularly on a well-advertised site. Do the arithmetic before you buy, not after.
- Can I get planning permission before I buy a property?
- Yes, and it is much safer. You can apply for outline or full permission on a property you do not own, and many sellers will agree a conditional contract or an option agreement allowing you to apply while securing the property. This converts an open-ended risk into a decision, and it is worth the time and the fees.