Land values for smaller residential development sites in England and Wales could fall after 1 st April 2007 when the Government’s Planning Policy Statement 3 (PPS3) comes into full force. PPS3 lowers the minimum development site threshold for affordable housing, which is typically required by developers as a Section 106 obligation.

Valuation specialists with property consultant Allsop are concerned that the fall in the affordable housing threshold from 25 to 15 units will reduce developer’s profitability on smaller sites, leading to reduced demand and a suppression in land values. The change is most likely to affect suburban and rural locations rather than city centres where dwelling densities for flats and apartment schemes are already normally in excess of 30 per hectare. Sites with planning permissions already in place will be unaffected, as will retrospective amendments to existing consents.

Andrew Hunt, a valuation specialist with Allsop’s northern office says: “This aspect of PPS3 will squeeze developer’s profit margins still further and product quality may suffer as construction costs have to be kept as low as possible."