Over the last 12 months, developer Caswell & Dainow have seen a 50% increase in enquiries, the majority from homeowners interested in selling parts of their garden off for development.
Co-founding director Adam Dainow says: “In the cost-of-living crisis people are looking at ways they can release large sums of cash to help out."
But not everyone agrees that selling off some of your land, while appealing in the short-term, will have little or no impact on the value of your home when you come to sell up.
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MoneyWeek investigates the pros and cons of selling off some of your garden.
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Does your land have development value?
Your plot must be big enough for at least one property which is in keeping with the size expectations of similar neighbouring properties.
In inner city locations where space is scarce, your plot may not be expected to host a property and a garden, for example. A small terrace or balcony may be sufficient. In suburban areas, where large gardens and privacy may be expected, a desirable plot is likely to be larger.
How much money could you get from selling part of your garden?
That depends on whether you live in a higher or lower value housing market. According to Caswell & Dainow, a plot of land where a typical three- or four-bedroom house sells for £500,000 to £600,000, your land could be worth up to £100,000 before planning permission or between £150,000 to £200,000 after planning permission has been granted.
In housing markets where the same size property sells for between £750,000 to £1 million, homeowners could expect £150,000 to £175,000 for their garden pre-planning permission and from £200,000 to £275,000 post planning permission. These values rise to up to £300,000 and £400,000 pre- and post-planning respectively where nearby homes sell for up to £1.5 million.
Dainow says: “We worked with a homeowner in North London who received £150,000 for land to the rear of his property where planning was secured for a three-bedroom family home and a family in South London who received £140,000 for overgrown side land that had become a regular site for fly tipping.”
But those living in more modest neighbourhoods need not miss out.
“In areas of lower value, landowners may still net between £30,000 and £60,000 for a slice of their garden for a single home,” he says.
How does it work?
If your property has a mortgage secured on it, your lender must agree to the sale first.
The bank’s lending is based on the original value of your property, which will go down when you sell part of it – reducing the value of their security.
The lender will also be looking at the future saleability of your home, says Nicholas Mendes, mortgage technical manager at brokerage John Charcol.
“Practical details matter,” he says. “If the sale affects access, parking, drainage, services, boundaries, or rights of way, it can quickly become a problem.
“What often derails these plans is not the idea of selling land itself, but the knock-on effect.
“A lender may be nervous if the remaining property becomes less marketable, if valuable development potential is being carved away, or if the title becomes more complicated because of covenants, restrictions, or unclear boundaries.”
Your mortgage lender is likely to request a valuation at your cost before making a decision. Lenders can ask for part of the mortgage to be repaid from the sale proceeds depending on the size of your debt and value of your property after selling some of your garden.
If you have been given the go ahead, you have three routes to choose from;
- Sell your garden to a developer before getting planning permission – this is a quickest option but will net you the lowest price.
- Agree with the developer on a ‘subject to planning’ offer, whereby they agree to buy your garden at a higher price on the condition they can get planning permission – you’ll need to instruct a solicitor to draw up a contract.
- Apply for planning permission yourself. This is the costliest option but if successful, you’ll end up with the highest price for your land.
Will selling your land devalue your home?
That depends on the size of your original plot, the amount of land you are left with and the type of area you live in.
Richard Sexton, managing director of Legal & General Surveying Services, said: “In some cases, selling off some land won’t hit the value of your property, particularly where the remaining plot is still generous for the type and location of the property.
“A house with an acre of land may still feel substantial and attractive with half an acre of land, especially in rural or semi-rural settings. However, buyers will pay a premium for space, outlook and exclusivity – so removing development land can still reduce desirability even if the house remains objectively sizeable.”
Land only adds meaningful value to a home where it contributes to privacy, setting, future potential or overall enjoyment of the property. If the sale changes the character of the house or reduces separation from the neighbours there is usually a material impact on value and market appeal.
Those with a smaller plot to begin with, in a suburban location, are more at risk of damaging the value of their property.
“Carving off land can alter the balance of the property quite significantly, affecting privacy, parking, outlook and future extension potential,” adds Sexton.
“In valuation terms, buyers tend to react more negatively where the remaining plot begins to feel compromised or out of keeping with neighbouring homes.”
Brett Ray, registered valuer and founder of Survey Shack, an app-based property assessment tool, has seen the impact on saleability first hand.
“Part of the garden to a house on my street had previously been separated from the original plot,” he said.
“That property has now been on the market for over a year. Ray believes this shows how reducing garden size and altering the original plot can “affect future saleability”.
Since the pandemic, Ray says outside space has become much more valuable, particularly in and around large towns and cities so homeowners should weigh up the risks and benefits carefully.
What to consider before selling your land
A loss of privacy, your garden or windows being overlooked, extra traffic down your drive or side access to your property and the stigma of being the property with the smallest garden on the street are all serious considerations for sellers, says Trudy Woolfe, director of lender services at e.surv chartered surveyors.
“Many people just see the pound signs rather than thinking about the impact,” she adds. “It’s a fine balance.”
Practical complications around access rights, drainage and shared boundaries can all affect saleability and the chances of getting a mortgage if not handled properly.
If your garden has development potential, by selling off the land, you are eliminating an upside of the original property.
And, by selling it to a developer who secures planning permission and sells it on to a builder, you lose control over the design quality and materials used which could have a detrimental impact on the desirability of your home.
Dainow says a good developer will make sure any new homes built on garden land would be positioned to protect the homeowner’s privacy and property value.
But rather than take the developer’s word for it, you can get specific terms written into the contract with the developer.
For example, you could agree you don’t want to look at any windows from a particular elevation or that maintenance of any new access created is the responsibility of the new owner.
You can also include an ‘overage’ clause in your contract which stipulates that the seller gets more money if the land becomes more valuable after the sale because more homes are being built on the land than originally agreed.
Independent advice should be sought from both a solicitor and chartered surveyor with development land expertise before agreeing any terms as land values can vary considerably depending on planning prospects and local demand.
