Development land price growth led by regional cities

Development land prices for greenfield sites in England remained largely unchanged between April and June but growth is led by brownfield sites in reginonal cities.

Prices for land in prime central London was also largely unchanges but urban brownfield land values continued to rise, largely driven by demand in three regional cities, namely Birmingham, Manchester and Leeds, according to the research from real estate firm Knight Frank.

Greenfield land prices rose by 0.7% in the year to June and the report says that while this may be a modest rate of growth, it marks the first time the annual change in land prices for greenfield sites has been in positive territory since the end of December 2014.

While the factors that have weighed on land prices, not least construction costs and the cost of planning, are still evident, there is evidence of improving demand, especially in areas where the demand for new housing is high. This has, to some extent, put a floor under pricing, it points out.

Moving into the more urban areas, however, a more mixed picture emerges. Average urban development land prices rose by 1.2% in the second quarter of 2017 and are up 6.3% year on year.

Values in these markets, which include sites in five of the UK’s key cities, have risen by 23% since the start of 2015. However, as ever with the property market, there is a regional difference in performance, with prices being augmented over the average year by the growth seen in Birmingham, Manchester and Leeds.

In the prime central London residential development land market, prices are starting to flatten out, the report also points out as values have now been unchanged for two quarters after five consecutive quarters of price falls.

After rising by nearly 50% between September 2011 and June 2015, development land prices have fallen by a cumulative 13%. However, the 3.5% annual decline in pricing shown by the index, which is collated using the valuations of a basket of development sites across central London, can only ever give a picture of what average declines are.

‘We have seen sites in some locations hold their value over the last year, showing no change in price, while in others, prices may have fallen by as much as 6% over the same time,’ said Ian Marris, joint head of residential development at Knight Frank.

‘Location and quality of opportunity on development sites are more important factors in determining land pricing than ever before. Value as ever, is in the detail,’ he added.