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Planning Opportunity from Office to Residential?

5 March 2013

The government has legislated to allow the change of use of offices to residential WITHOUT planning consent! New laws will come into force in April! Sounds great but...

Local authorities can “apply for exemption”. Most in London and large cities already have. It is not clear if some/all will be successful (as there must be clear reasons) but it is clear the real rational behind the resistance is the usual friend….MONEY!

To illustrate this, imagine a local authority taking £30,000++ per annum in business rates on a sleepy old 150m2 office in London. Suddenly, the owner can change the use to residential…say 2x 2 bed apartments. Council tax might attract £6000 at best and that is paid to central government whereas the £30000 business rate is paid to the council directly. Now it is easy to understand the resistance of the council despite the supply/demand drivers and political hot air.

It seems likely there will be exemptions and if not councils will try other ways to stop the law (or at least curb its effect). This kind if political fog is quite normal in the British planning system. In short, delays, no clear policy and a lack of backbone in decision making it quite normal. However, as ever, the lack of clarity, although frustrating provides the opportunity for the investor to generate large returns should a planning decision go in their favour.

My experience over many years has shown that in planning there is never (in reality) any clear or sudden change in direction. However the changes that are made from time to time “load the dice” a bit. I believe the law change on permitted change of use from office to residential is one such moment. For the longer term investor, purchasing a site now with potential to convert to residential from commercial may be very wise and produce handsome returns. A particular local authority may well have opted out of the government scheme but the political will is clear. Should a decision go to appeal, arguments are stronger in favour of the developer.

I have for some years argued that “buy to let” is not enough. “Buy to develop to let” is the theme behind buy2letExpert.com and I firmly believe that adding some development gain into the buy to let mix is not beyond the reach of even smaller investors. For more detail see our section development . Buy the house with a little development potential and not the place needing just a lick of paint only. Development could just be a mansard roof or an extension into the garden. Even a home/office in the garden may be enough? Politics have even moved on these areas too.

To summarise, do not expect a change in government policy to suddenly provide great opportunities BUT do not ignore the gradually changing trends in thinking. When purchasing, doing homework on planning policy is essential and can be very fruitful. Such a buy to let investment can start life on yields possibly double the average for the similar undeveloped property next door! To summarise:

“Buy, then develop, then let”


Development to Let in London... 10% and yields rising

6 January 2013

Aside from social housing, development for let is currently only a tiny proportion of the U.K. property market. I firmly believe the market will grow exponentially in the coming years as the U.K. starts to catch up with many of our European neighbours. Our 20 years of experience are London focused but the same principles will apply in other parts of the U.K.

Development to let is already starting to attract the interest of the government and larger home builders who see a shift in property buying behaviour, especially in London, away from owner occupation and towards the private rental of homes. The buy to let London investor must follow this growing market trend in order to maximise returns in the future.

Latest Bank of England and mortgage provider data adds to gathering evidence that cheaper and more plentiful finance will become available to investors in 2013. It is my opinion that we are moving towards the later phase of a golden period for residential property investment and now is the time to invest. Consequently, demand for stock will start to increase in 2013. London property investment should not be delayed but potential purchases should still be evaluated using yardsticks including:

Development to let Potential

Property development all sounds very grand but could be as simple a simple house extension or a couple of flats from a former house. Potential must be expertly evaluated but look for potential that may have been missed by others. Development of a property can be upwards (such as mansards), downwards (such as basements) or outwards and may be just simply a change of use. Think broadly and in three dimensions! High ceilings may mean more floors? London “butterfly” roofs may also mean an extra floor is possible? Always look “up” at a building and not just “at” a building. Learn to see real potential that others cannot see. Think with a very open mind. Executed potential can increase yields and capital values enormously and the tricky planning system can actually help the investor reach huge returns!


Measuring the gross rent as a percentage of the property value, yield is an important yardstick to compare investments. For the buy to let investor, potential yield is also important. When purchasing a property look for drivers of yield growth. This may be development potential (see above) or simply rearranging and/or improving a property to attract more rent.

Capital Growth

Always assume zero real (after inflation) growth. If negative numbers look likely, consider deferring the purchase. However, as finance becomes easier and cheaper, expect positive numbers.

Property Management

Always consider ease of management. It will be cheaper and easier to manage properties in similar areas. It may be even better if some a focused in the same buildings (e.g. a number of apartments).

Leasehold Properties

Be very wary when purchasing such properties. Expenses can be high and sometimes sudden. A new lift, new roof, new windows are examples. The freeholder may overcharge. In general I shy away from leaseholds unless I am also associated with the freehold.


At the bottom of the list only because we operate in London and it is no secret demand remains explosive. None the less always check demand drivers such as immigration, local house building and local demand factors. Check to see places are not sticking on the market using rightmove, zoopla and other similar sites.

It has never been a better time for the buy to let investor! Yields far exceed bank deposits. It is always the case that at such times (like in previous cycles) banks cannot react positively to this. For those with cash or access to funding there is a huge opportunity for buy to let property investment in London.

Chris Jackson (Director)


"It has never been a better time for the buy to let investor! Yields far exceed bank deposits."
Chris Jackson of Buy2LetExpert

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