The value of urban land increased by 2.1%, bringing annual growth to 8.5%, according to the latest data from property firm Savills and has been buoyed by strong rates of sale in the new homes market.
Momentum continues to build in the land markets across the country but towns in the London area have performed especially well as builders seek clean, edge of town greenfield sites, pushing prices back to their 2007 levels and beyond.
Brighton, Canterbury, Hayward’s Heath, Crawley, Oxford and Sevenoaks have all seen green field prices return to, or exceed, their pre-crunch levels. However, the national picture disguises distinct regional, and local, markets. In the south east, the best performing region, green field values are within 16% of their peak.
Even the north of England, the region where land markets suffered most severely in the recession, is now seeing sustained levels of land price growth. Annual price growth in green field land is up 13.8%, outperforming even the south east over the same period, although values remain half of their former highs. Buyers appear to be taking advantage of discounted prices during this window of opportunity, according to Jim Ward, Savills director of residential research.
He pointed out that recent price movements conceal a reduction in the value of affordable housing land, offsetting stronger growth in the value of land for market housing. Larger serviced green field sites in strong housing market locations are appreciating in value more quickly than their small site counterparts. This comes as house builders seek sites at scale to secure land pipeline while delivering at higher rates.
For example, some very large 2,000 plus unit strategic sites have traded this year, a sign of strengthened market conditions but not without government support. Sherford, a 5,500 unit new town in Devon, was supported by £32 million loan from the HCA’s Local Infrastructure Fund.
Small, oven ready sites are still in demand, however, driven by the requirements of recapitalised small and medium sized builders with growing market ambitions.
The report also shows that urban land continues to underperform green field land, recording more modest levels of quarterly growth for three successive quarters and remaining further from peak.
‘The viability of high density schemes are being increasingly squeezed by build cost inflation. That said, the south east saw comparatively strong urban land price growth in the second quarter at 3.3%, boosted by demand from buoyant housing markets close to London,’ said Ward.
‘With a rapid recovery in the new homes market and higher rates of build, material and labour shortages are putting pressure on build costs. According to the latest Home Builders Federation survey, the availability of materials, materials prices and labour costs were the fastest growing constraints on development in the first part of 2014. Meanwhile, figures from Building Cost Information Service suggest tender prices have already risen by 7% in the past year. This leaves less room for land price growth,’ he added.
According to Savills’ survey of agents, there has been a marked uptick in the number of sites coming to market, and in turn, the number of deals done. Land is coming forward fastest in the south east and east of the country, where land owners are taking the opportunity to sell amidst strong housing market conditions.
‘Our market conditions survey paints a positive picture across the country. Development land agents report positive market conditions in 90% of the UK locations we monitor, up from 69% a year ago,’ explained Ward.
‘Sentiment remains strongest in the south east, but conditions have improved most markedly in the east, where agents reported positive sentiment in 82% of the locations we monitor, up from 55% the prior quarter. This has been reflected in relatively strong green field land price growth in the east, moving from an increase of 1% in the first quarter to growth of 4.6% in quarter two,’ he added.
