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Development land values in England and Wales up 2% in first half of 2014

It means that land values have increased by 2% in the first six months of the year overall and in prime central London development land values are up by 18.9% on an annual basis, compared to 15.9% in the first quarter.

The increase in land values mirrors the growth seen in house prices over the last year and the pace of growth in land prices is also regionalised, just like house prices, the index report shows.

The biggest growth in land values has been seen in prime central London where urban development sites climbed by an average of 6.7% in the second quarter while brownfield sites outside this sector in Greater London have seen the next biggest rise in values, climbing by an average of 14.2% year on year.

Yet it is not just a case of a north-south divide in land price movements. While greenfield site values in the South East have risen around 3% on the year, those in the North West are up by 6%.

According to Grainne Gilmore, head of UK residential research at Knight Frank, the Help to Buy Equity Loan scheme has helped uncork demand, especially in the North and Midlands, and this has been reflected in robust sales volumes reported by house builders in their half year results.

But she pointed out that some developers have noted that the pace of growth in demand may be starting to slow. ‘This could be partly due to the lending market adjusting to recent policy developments. Developers have also been facing increased build costs over the last year or so, as the turnaround in construction activity has put pressure on supply,’ she explained.

‘This is likely to remain the case for some time, and construction cost inflation, ranging from the cost of materials to wages for workers, could in some cases act as a dampener on land prices,’ she added.

Gilmore also pointed out that values in the North West are rising from a lower base per acre, but nevertheless, this increase underlines a return of investment into these markets.

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