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Green Belt Blues

I have a mate who has built a house at the top of his garden. His house is already large enough, however, he was also painfully aware that getting his kids onto the housing ladder would be nigh on impossible by the time they are old enough to take on a mortgage. He lives in North London and his garden is over 200 feet long, so ample room to accommodate the other house at the far end once he had demolished his garage. Access is via an established lane that contains other houses and garages. Construction was contracted to a local builder and a smart 3 bedroom dormer bungalow now sits there. Before building the bungalow, his existing house was valued at £1.4m, and once Planning Permission was obtained it increased to £1.6m.

Once the garden had been severed and two legally separate plots established, the value fell of his house fell back to £1.2m and when the bungalow had been built, this alone was valued at £1m. Even taking into account the build costs and all fees, this still represents a clear profit of c£700k. A huge profit, a good investment and a home for his kids in later life. In the meantime it would generate a good income by being rented out and benefit from any capital appreciation.

His neighbours were, understandably envious of his foresight and at least 2 others decided to apply for Planning Permission themselves. Other property developers also noted the fact that this was the first house to be built at the bottom of a garden in this particular road and decided to mail-shot residents, offering to buy half of their garden with a view to building a similar bungalow to my mate. Once a property has been developed in this way, it can set a precedent and make future applications easier.

In common with many local authorities, details of all planning applications are detailed on their website, thus providing rich pickings not only for the aforementioned property developers, but also scammers. Submitting a planning application for developments such as that described above, can also evidence an appetite to make a quick profit from property in general - which is where they come in.

Typically, the scammers buy fields from farmers just outside of a town - usually in the 'Green Belt', and ideally close to an 'A' road. Typically they will pay a few hundred pounds per acre (an acre is roughly the size of a football pitch) They then subdivide the field up into generous house-sized plots and produce a glossy brochure and website proclaiming the unmissable opportunity to get in early an a fantastic investment. If they buy a building plot now, they will see a massive increase in its value as soon as Planning Permission is obtained - which, apparently, is only a matter of time. To add extra authenticity, a number of the plots are already marked as sold.

To support and validate their claims they include quotes from politicians bemoaning the chronic housing shortage and the ever increasing population of the UK. A plot bought for £20k now could be worth over £100k once Planning Permission has been obtained. They often also limit customers to a maximum of 3 plots, and by limiting the availability, they effectively increase the exclusivity and make the offer even more attractive in the eyes of someone trying to make a quick buck. If viewed objectively, the calculations involved are not unrealistic. A plot without Planning Permission could indeed increase substantially in value once it has been obtained.

However, wake up and smell the coffee! If Planning Permission was a realistic proposition, why would the farmer who owns the land not develop it themselves? Farmers are a canny bunch and are, in my experience, incredibly savvy. I cant see any of them passing up an opportunity to make such easy money. Even if they had sold the land to a property developer, why on earth would that same developer decide to share their good fortune with random strangers rather than taking such huge profits for themselves???? The reality of the situation is that there is as much chance of Planning Permission being granted as there is of me being a contestant on Love Island.

Property is ordinarily one of the safest investments you can make. Homes Under the Hammer must have inspired thousands of people to make great investments to either live in themselves or sell on for a decent profit. Some have gone on to carve out careers as property developers, and whilst their are no guarantees, as long as you do your homework, the chances of you making a catastrophic loss are small.

Anyone who tries to sell you one of these ploys will undoubtedly gloss over the fact (1) they cannot guarantee Planning Permission will be granted now or at any point in the future, (2) any attempt to obtain a refund will incur an administration fee of up to 50% of their original investment and the remainder must be reinvested in another similar scheme, and (3) they can obtain independent specialist advice if they wish. Funny that.

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