The FINANCIAL -- Gráinne Gilmore, Head of UK Residential Research at Knight Frank,
comments: “The easing in growth of residential development land values
in the first three months of the year masks a continued demand from
developers and house builders for well-located, ‘oven-ready’ sites with
planning permission already in place.
These sites are achieving in excess of asking price in many cases.
“Less well-located sites with compromised planning are attracting limited interest however, and buyers are offering discounted bids to reflect the perception of risk and the poor funding markets. There is some interest in small flat schemes in strong M25 locations.
“Sites in the South of England, outside London, where finished properties are set to fetch less than £175 per square foot – which equates to a end sale value of around £200,000 for a typical family house, above the national average price of around £165,000 – are attracting little attention from developers, who are keen to target more affluent house-buyers.
“The biggest demand for sites is in London and the South East, marking a further polarisation between the North and South of England.
“There has also been an increase in land coming onto the market as a result of distressed sales, especially in the South West, easing the lack of supply that has supported prices over the last 12 months.
“In London supply remains a key issue although a number of high profile sites have come to the market over recent weeks, however, with competition for the most desirable sites especially from Far Eastern and Middle Eastern purchasers is expected to push up prices over the next twelve months.”
Who is selling?
“Unsurprisingly, given the current spending cuts, public sector bodies are among the key vendors across England who hope to take advantage of current residential prices and to avoid a downturn in land values if house prices record another fall this year. The same is true in the London, where public sector bodies are selling more land in the capital than other groups such as private land owners or speculative land investors.”
Who is buying?
“Residential and commercial developers are dominating the market in the Capital, accounting for the majority of purchases, while speculative land investors are in a minority. But this trend is not continued outside London, where speculative land investors, along with residential developers and house builders, are most active in the market.
Outlook
“There are positive trends in London and the South East which are set to continue, with land values in London set to rise 10% this year, but we expect values for greenfield and urban land across the rest of the country to remain largely flat.”
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