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Residential development land recovery is patchy in UK

Detailed locational analysis by property adviser Savills shows that hotspots in the North that have more in common with the South than their own regional average.

Average land value growth across all regions is being driven almost exclusively by activity in high value towns, with demand focused on readily developable land, the report says. This is leading to deep divisions between the local market leaders and laggers, and the variations in levels of price recovery are far more pronounced than in the underlying residential sales markets.

At the extreme, greenfield land values in Oxford are now just -5% from peak compared to Bradford where values are still -69% below peak, according to the latest Savills research quarterly development land index.

Annual land value growth across the UK stood at 5.4% for greenfield land and 1.8% for urban land by the end of June 2011, leaving values at -45% and -52% below peak respectively.
But these national figures disguise clear regional and sub regional variation in performance that goes well beyond a clear North/South divide. Savills says that the divergence between the leaders and laggers is at its widest in the South East, with values in Hastings still -53% from peak, compared to Oxford which has almost fully recovered.
While development viability is a major barrier to delivery on many sites, in areas of higher demand and value, uncertainty and delays in the planning system are now cited as the main restriction on the number of permissioned sites coming forward.
New planning consents in England, over the last four quarters, were down 41% on 2006/7 levels, and permissions granted in the first quarter of 2011 show year on year falls.
‘A shortage of permissioned land is putting pressure on prices in the best locations for sites that are ready to develop. Some larger house builders are now looking for medium sized sites in the most viable locations in order to secure a pipeline that will help offset delays in the planning system,’ said Yolande Barnes, head of Savills research.

‘The government has set a clear pro growth agenda, but it remains to be seen how quickly this will filter down and impact favourably on the delivery of new planning permissions and, therefore, deliverable land,’ she added.