After several quarters of slowing growth, the average value of green field residential development land in England and Wales fell in the first quarter of the year, the first decline since December 2012.
Prices fell by 1.8% in the first three months of 2015, taking the annual change to -0.5%. However the picture across the country is more mixed with the land index from real estate consultants Knight Frank showing that development land prices in prime central London also stalled in the first three months of the year.
Land values in price central London remained unchanged in the first quarter, the first time they have not risen since the index began in 2012. But on an annual basis, prime central London development land prices were up 18.5% in the first quarter.
This slowdown is the result of a gradual slowing in price growth over several quarters, according to Grainne Gilmore, head of UK residential research at Knight Frank.
‘Across the country, many house builders have been replenishing their pipeline of land over the last 12 to 18 months, both consented and strategic. For strategic land, they have started guiding it through the planning system. As such, demand for consented land has eased. Sites which are oven-ready and perfectly located are still attracting interest however,’ she explained.
She pointed out that there has also been a notable trend emerging of an increased appetite for strategic land among larger house builders as this can result in higher margins. But on a short term basis, the development land market, much like the housing market, has also been affected by the upcoming election, with some developers and house builders deferring decisions in recent months until the outcome of the election is clear.
‘All the parties have pledged to boost housing supply in the years to come, through a variety of schemes from brownfield regeneration funds to support for small to medium sized builders,’ said Gilmore.
‘A theme that is set to continue through the election and the rest of the year is the increased cost of building. Material and labour costs continue to rise, and this is also putting downward pressure on land prices,’ she added.