Ransome values

From The Daily Mail:

A group of 26 ambitious homeowners are hoping to sell their properties as one big ‘super site’ to maximise their profits.

The residents in Baulkham Hills, in Sydney’s north-west, have joined forces to create what they are calling ‘Hillsview Central’, a site almost two hectares in size… The average median house price for the area is $1.15 million, but residents are hoping to get approximately $2.3 million per property if the new deal goes through.

Well done Mrs Papas for getting this all off the ground! That planning uplift has to go somewhere, and (in the absence of LVT), if the current owners do the site assembly themselves, then they get all get a share of the gain. This must be preferably to a large developer mucking about for years or decades buying up the sites piecemeal in the hope of banking the entire gain for himself – but making himself more and more vulnerable to a ransom demand as time goes on.

This illustrates the point that all ultimately all land values are ransom values, despite RICS’ flummery, in the criminal sense. Every landowner is holding everybody else to ransom.

As we see from the photograph, there are two gaps along the front row, let’s call them Plot 2 and Plot 13. This puts Plots 1 and 14 in a very weak position, as I doubt a large developer would be interested in such a wonky shaped plot.

Heck knows what the (owners of) Plots 2 and 13 are playing at. Are they:

1. Just complete spoilsports who don’t understand the maths of all this and who don’t care if they ruin things for Plots 1 and 14, and probably dilute the gains for everybody else?

2. Hoping to do private deals with Plots 1 and 14 whereby those two have to hand over a chunk of the marriage value to Plots 2 and 13?

3. Gambling on the developer buying all the plots including 1 and 14 and then holding him to ransom for an even larger amount?

4. Risking the developer just buying up plots 3 through 12 and cracking on with it, in which case Plots 2 and 13 fall in value considerably and have to put up with being next to a building site for a year or two? Plots 13 and 14 in isolation have little marriage value and will be stuck between a block of flats and an office block, so Plot 13 is playing the more dangerous game.

It might be a long time or never before there’s an opportunity to sell Plot 2 to a future large developer who wants the land to the left, in which case the boot is on the other foot and Plot 1 can hold Plot 2 to ransom.