Land prices record steepest rise for 5 years

Aaron Morby 14 years ago

House builders’ hungry appetite for good land drove up prices in England  by the fastest rate since the first quarter of 2005.

According to agent Knight Frank, which runs its own index, housing land prices leaped 11.5% in year to March 2010.

But this fresh appetite for land may be short lived. The agent has also warned that the election outcome is likely to bring fresh turmoil to the land market.

Liam Bailey, head of residential research at Knight Frank, said: “Following the indecisive election result, the key issues to watch will be the lack of grant availability from the Housing and Communities Agency, which will become critical over the next three months.”

He also warned that there was likely to be a degree of turmoil in the strategic land market caused by proposals in the Conservative Party’s planning green paper and also the Liberal Democratic VAT policy for new homes.

“With political deals in the offing no-one can be certain which policy mix will ultimately prevail,” he said.

The first part of the year saw house builders hotly pursuing greenfield land, up 7% in the first three months of 2010 compared with urban land, just 2.4% higher in the same period.

Urban land prices roses fastest in London at 6.8%. The West Midlands saw the highest jumps in greenfield land, up by an average of 12%.

Bailey said: “Residential development land values are rising on the back of improving demand  and a slow growth in supply volumes.

“House price growth has certainly helped, but it is the supply and demand dynamics in the land market which is really pushing prices higher across the country and especially in the south of England.”

He added that the low availability of speculative development finance for projects over £10m was still a brake on growth.

House builders are back in acquisition mode and now represent 44% of all purchasers.

“They are looking very hard at Greenfield locations where they are finding a wider range of attractive sites compared to six months ago,” said Bailey.

Greenfield land is still attracting a premium with the ease of construction and reduced margin for risk proving to be a key driver in bidding for land.

Urban locations are still not being targeted outside of London. Where they are, it is as much by the RSLs, who are still a force in these markets, as it is the house builders.

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