Impact of Planning in the Property Market

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Planning in the property market

Running Head: Planning in the property market

Impact of Planning in the Property Market.

Craig O’Holleran

Heriot-Watt University

Introduction

“Land is now one of the most regulated markets on the planet” (McLaughlin, 2012: p50).

There is a lot of debate whether planning policy in the property market is beneficial to all involved. Is the property market better off without the restrictions of planning policy? Are developers the winners and the public the losers or vice versa? This paper will try to explain the role and impact of planning on the property market regarding land use, land supply, demand, restrictions and levies on developers. The method of research for this paper is though various peer-reviewed journals and Governmental documentation.  

The Role and impact of planning on the property market

The property market deals with the rights and interest in land and buildings (Balchin el al, 1995). The ownership of the rights to occupy a site can give great benefits to the buyer through development and investment. All land is heterogeneous and a use of a particular site may suit a specific purpose or command a higher price for one use over another.  

The property market consists of many land users such as, residential, retail, agricultural, offices, and manufacturing. Developers are competing for this land to develop properties with the use that will command the highest value. There are different theories to what would happen if the developers were left to there own devices in the property market. The uncontrolled market should in theory be guided by Adams Smith ‘invisible hand’ in where supply and demand will always return to its equilibrium however the market without regulation would ignore social needs (Balchin et al, 1995). The developers would only develop to meet their own needs and to maximise profit. Developer’s motivation is for the result of profit where as in planning it is for the good of society. As said before economists use different theories in favour of an unregulated property market with central place and land distribution theories but the fact is that most of these theories have a tightly prescribed set of assumptions and circumstances (Campbell, 2009) making their outcomes unrealistic.

Before planning regulation the markets did achieve a prosperous economy especially during the industrial period. Mass migration into city centres lead in an agglomeration of people and economic activity such as heavy manufacturing. The influx of people to the centres lead to a large demand for housing which in turn was providing employers with a large work base. The ever expanding and developing cities lead to a lot of external costs such as overcrowding, poor building standards, and unsanitary conditions, toxic air and water, loss of open spaces and lack of local amenities. Mohamed (2006) identified that without planning regulation satisficing occurs in developers and they would build on green field sites which are quicker to develop leading to ribbon developments and urban sprawl. Those who think of the market as a neutral allocator of resources might actually amplify volatility (Needham 2000) 

Due to the costs on society with the externalities mentioned above there is a need for intervention. A paper by McLaughlin (2012: p51) states that the ‘urban growth process is subject to a host of externalities and subsequently land control is necessary to internalise the external costs through either corrective taxes or direct control over quantity and quality of new development’. To internalise these costs Planning has intervened to prevent market failure and to protect the provision of public goods. This is done through a number of methods with the main methods of being zoning and various levies.  “In most cases spatial planning is an intervention in, or an influencing of, the creation and use of the physical environment by others” (Needham, 2000: p43).

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Adams (2010) recognises that planning is set into objectives to achieve a successful place. The main objectives that he picks out of several as the most helpful in achieving the goal is; shaping, regulating, and stimulation. Shaping involves making sure requirements are met such as housing requirements. Making sure stock levels for different needs are met and that there is not a shortfall or surplus. Regulating is making sure there are standards and contributions from the property market such as supply of affordable houses. Stimulation is trying to instigate specific production in specific areas through policy and subsidies to ...

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