When we discuss the factors that influence property prices, the most common ones are demand, the price of input materials, and labour costs. However, for some time now, the final price of a property has also been affected by the detailed planning process, which often takes up to ten years, making development much more resource-intensive.
Reading the comment sections, there are plenty of opinions on how property developers are being usurious and pushing up property prices beyond the reach of the average consumer. However, it is encouraging to see that people are already discussing how rising input costs and labour expenses impact prices. In addition to these factors, the price of property during development is also heavily influenced by complicated and time-consuming procedures.
The number of plans adopted has decreased every year
Last year, the number of detailed plans adopted was almost six times lower than it was ten years ago. A plot that is vacant during the procedure is an expense for the developer. Dealing with a lengthy procedure and involving different professionals in the process is also resource-intensive. The price of land is one of the most important determinants of the final price of real estate, and a lengthy procedure will significantly increase the price of land. If land acquisition costs are ten percent, each year of delay caused by the procedure increases total costs by ten percent to account for capital costs. This, in turn, means that the final price of real estate will be increasingly higher.
It must be understood that property developers are the ‘facilitators’ of this whole process. During the lengthy procedure, the costs incurred will ultimately be included in the final prices of the properties. Contrary to expectations, there will be no decrease in price. In fact, prices are likely to increase due to rising land prices.
Over seven years instead of three
The Planning Act stipulates that a plan must be initiated or not initiated within 30 days or within 90 days if there is good reason to do so. The Act on the Procedure for Detailed Planning states that a maximum of three years can elapse between the initiation of a plan and its adoption. However, the three-year requirement has already been extended to an average of six to seven years, which creates a snowball effect. As a result, developers have fewer completed projects in their portfolios, which creates a shortage of available properties and makes it difficult for them to offer affordable products to the market. This leads to a situation in which the average processing time is around 7.5 years, and the developer cannot react quickly enough to market changes and trends.
There are several causes for the delay. The lack of a single point of contact has made the planning process very confusing. Local authorities are seeking solutions to manage the pace of development. However, the decision-making process cannot be so slow or paralysed that no one can decide anything. It is also often not clear who is in charge of the procedure and what the problem areas are. This means that when cooperation with other agencies is required, the process is full of interruptions and duplications. For example, in some cases, one agency may require a developer to make changes requested by another agency. The procedure is, therefore, unreasonably lengthy due to the lack of specific regulations and cooperation between agencies.
Society sets standards and expectations
We are moving towards an open society where inclusion has become the norm. It is important to consider that a culture of inclusion during planning procedures may cause delays. This will be improved by establishing clear procedural rules and better communication (ie making the procedure known to interested parties), but also by strict adherence to the procedural timetable.
The problem would be solved if a single person in charge coordinated the whole procedure. This would avoid situations in which developers lack information about the procedure’s phase and timetable and do not know which agency is currently in charge of the procedure. The developer would then communicate only with the main implementer, who would be responsible for coordinating all procedures and information between the different agencies.
Ultimately, developers and officials need to understand that they are not on opposite sides of the table but need to work together. Only then will it be possible to find the best solutions for all parties. Developers aim to provide the best product and service while building buildings for their customers. However, they are also customers of the local authorities, and cooperation with them should be based on the goal of providing a good, high-quality, and fast service to the customer. Officials should help citizens find solutions and answers to their questions rather than seeking and creating new obstacles that are increasingly difficult to overcome.
