The value of residential development land in the UK fell by an average of 50% during 2008 with prime and super prime in London being the hardest hit.
Land values fell most in the last quarter of the year seeing a decline of 15% in just three months and no part of the country has been immune from the effect, says the latest Knight Frank Residential Development Land index.
House builders and other residential land developers were the biggest group of sellers and speculative land buyers were the biggest buyers during the year.
Outside of London the areas seeing the biggest price fall were urban parts of Yorkshire and Humberside where land prices plummeted 64%. Outer London did the best with prices declining 40%, the report shows.
It is the last three months of the year that saw values really drop off. Urban and greenfield land values dropped by an average of 17% and 14% respectively outside London in this period and Prime London, which had remained relatively resilient, saw the steepest drops, with super-prime development land falling in value by 33% in the quarter alone. Development sites in Inner and Outer London lost a quarter of their value during the same period.
'This unprecedented fall in land values experienced right across the UK is a reflection of the ongoing problems with securing finance for development and the continuing crisis in the house building sector,' said Jon Neale, head of development research at Knight Frank.
'Very few developers have cash or can access bank finance, and those that are in a position to buy are adopting an extremely cautious strategy. Only extremely well located sites or those suited for larger family homes, are attracting interest or, indeed, qualify for bank backing. Demand has dropped by between a third and a half, depending on location,' he added.
The report shows that there are very few sales at present with developers looking to sell although some are holding on to sites and waiting for better conditions. House builders and other residential developers represent, at 27% of the market, the largest slice of those selling land. Meanwhile, speculative land investors are the single biggest buyer group, at 24%, followed by the housing associations and private landowners.
Typical land values outside London now range from around £250,000 per acre for more peripheral sites in cheaper regions to over £1 million per acre for the best sites in the South East and East of England. London prices are far more variable – over £3 million per acre is typical in inner boroughs, but over £15 million per acre is achievable in prime locations, the report also says.