Slower development land value growth in UK due to increasingly polarised land market

Taylor Scott International News

Development land values across the UK have remained stable or increased only slightly in the last three to six months, according to the latest research report. Greenfield land values increased by 0.5% in the first quarter of 2015 compared to 0.6% in the fourth quarter of 2014, bringing annual growth to 5.8%, the data from international real estate firm Savills shows. Growth in urban land values, replicating their previous quarter performance, increased by 1.6% in the first three months of 2015 with annual growth at 9% exceeding that of greenfield land. Residential development land values in London remained stable over the six months to March 2015 following a period of strong growth, the data also shows. The UK as a whole has experienced increased construction costs and the scarcity of bricklayers and joiners has increasingly become a problem, the report points out. In some parts of the UK there have been fewer bids per site due to the selectivity of house builders. These factors have prevented land values from rising significantly. Download the full PDF report > > However, the picture across the country is varied and is becoming relatively polarised between higher value markets of stronger demand, generally in the South East, and the rest of the country. Residential development land values in London remained stable over the last six months after very strong increases in values in 2013 and 2014 with 25.8% growth in the year to March 2014. Sentiment for London residential land remains strong, the report says, particularly in areas with good transport links or planned infrastructure improvement and sites continue to attract a high number of bids. However, increasing construction costs, the introduction of CIL in some boroughs and election uncertainty have kept residential development land values from increasing. The growth in hotel and office development land values in London has lagged behind residential since the start of the recovery in 2009. However, in the last six months values for hotel and office land continue to grow while land values for residential stand still. Development land values for hotels and offices in the capital increased by 3.8% and 4.4% over the six months to March 2015 compared to 0% for residential development land. Scotland stands out as experiencing strong increases in urban development land values which rose by 6.9% in the quarter. This follows the bounce back in greenfield land values last quarter after the referendum in September 2014. Both urban and greenfield land values had relatively low growth leading up to that point. Urban land values in Edinburgh and Glasgow have been at the forefront of this growth and now stand at double that of their 2008/2009 lows, approximately three quarters of their 2007/2008 peak. The South East and Cambridge has the highest value land market where sites, according to a survey of agents, receive the greatest number of bids. Development land values in this area are the highest in the country, in many cases above their… Continue reading →

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