English urban brownfield land values continue to rise
English greenfield land values may have dipped again in Q4 2016, as did those in prime central London. However, urban brownfield land values continued to buck the trend rising by 2.1%.
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Average values for greenfield residential development land sites around England fell for the fifth consecutive quarter in Q4 2016. The greenfield land index, made up of a selection of sites across England, is now 7% lower than its peak in Q4 2014, and is at a similar level to that seen at the start of 2013.
The UK housing market remains characterised by a shortage of homes in many areas where demand is greatest, and by record-low mortgage rates.
However, the movement in land prices also reflects the wider economic environment, especially the uncertainty in the medium-term over the impact of Brexit on the UK economy.
As such, developers are adding in margins to allow for this uncertainty, putting a squeeze on land prices. Economic and fiscal policy is also playing a part in the prime central London land market, an area where the property market is still absorbing major changes made to the stamp duty regime over the last two years.
Ian Marris, joint head of Residential Development, said: “The market for land in PCL is showing signs of conditions last seen in 2010 where, after two years of falls, the savvy investors returned to the market and bought in expectation that pricing was reaching the bottom. It is probably a little premature to make the same conclusion however it feels like it is close and we can certainly see value returning to development appraisals.”
"The market for land in PCL is showing signs of conditions last seen in 2010 where, after two years of falls, the savvy investors returned to the market"
_Ian Marris, Joint Head of Residential Development,
Meanwhile, the urban brownfield land market which bucked the wider land trend, showing 18% growth over the last two years.
The urban index encompasses sites across five major cities. It is noticeable that pricing in Birmingham has been strongest over the most recent quarter. This highlights how, even with wider economic uncertainties, the prospect of regeneration, potential transport uplifts, and a positive local economic picture, can underpin land pricing.
Read the full Knight Frank Residential Development Land Index.