But it was a different picture in London where land in prime central areas increased by 2.5%, although it was a much more modest rise compared to the 20% hike in prices in 2011.
The latest Residential Development Land Index from Knight Frank also says that there is little expectation of growth in land prices this year.
It says that land prices in England and Wales have largely mirrored house prices, which have also remained broadly unchanged and there is also little expectation of growth in house prices in 2013.
However, there are some areas which are seeing more activity than others. Geographically, south east England is a key target for house builders, as are market towns across the country. According to Gráinne Gilmore, head of UK residential research, sites in towns boasting a healthy local economy, and the employment prospects which come as a result of that, are always in demand, but never more so than now.
‘In terms of sites, those with planning consent which are suitable for between 50 and 100 units attract the most interest and multiple bids are not unusual in these circumstances. The fundamentals underpinning demand for such sites are closely linked to what is happening in the housing market,’ she said.
‘Developers and house builders are seeking to build family houses with three or more bedrooms in locations where the local economy is outperforming. By attracting families who have already owned a home, they are targeting buyers who are equity rich and able to access finance despite the current constraints in the mortgage market,’ she explained.
‘As can be seen from the recent trading updates from house builders, the sector is in good health, with many house builders growing their margins. This is set to remain the case in 2013,’ she added.
The report says that the UK government remains the most active seller of land as it seeks to dispose of large Ministry of Defence sites. Private landowners also remain active in the market.
Overall land prices in London responded to the strong performance of property prices at the end of last year. Average house prices in prime central London also rose by 1.4% in the last three months of 2012 and although this pushed annual price growth to 8.7%. Such a rise during the year has not been replicated in land prices however, with a more modest 3% rise during 2012.
Gilmore also said that there has been continued interest in development sites with scale, offering an opportunity to add value. ‘Indeed, there is a real demand for sites with planning in place so investors can take advantage of the short term cycle in London. It is also noticeable that house builders are exerting more pressure on land prices in central London as their attention has been increasingly drawn by the opportunities in the capital,’ she pointed out.
Also, house builders who traditionally focussed on the regions are entering the market. ‘They are currently strong in the fringe areas but may possibly enter more central areas, albeit on
lower profile schemes,’ she added.
